A-B takeover of Harbin under threat
company Castlerigg International has bought a strategic 10.01 per
cent stake in China's Harbin Brewery, a move that looks likely to
put more pressure on international brewer Anheuser-Busch's designs
on the company.
The 10.01 per cent investment is widely seen by investors as a strategy that aims to increase the market value of share prices in China's fourth largest brewer. A-B is a Cayman Islands registered company and under the island's laws it must have a 90 per cent share of a company in order to undertake a compulsory privatization of any company.
This means that as long as Castlerigg holds onto its share of Harbin, A-B's plans to take over the company and use it as a major platform for the vast China beer market.
Investors believe that this strategy aims to boost share prices in Harbin price at what is deemed to be a crucial point in A-B's designs on the China market.
Market observers suggested Castlerigg International bought the stake to pressure Anheuser-Busch to increase its offer price for Harbin Brewery shares. Some investment bankers doubted the success of such a strategy, however.
Indeed some investors say that Castlerigg's strategy could backfire. A-B's share offer for Harbin have already been deemed to be above market value, which suggests there is not much opportunity to increase the share price. On top of this the strategy could also lead to the A-B's share in the Harbin being withdrawn from the Hong Kong stock exchange because it doesn't have a high enough share capital in public hands. Likewise it could lead to A-B issuing more new public shares, which would dilute the company's stake.
Castlerigg started buying the shares at the end of May and at the beginning of this week, bought a further stake to make it up to 10.1 per cent. However, in view of the power that A-B still wields as a majority shareholider in Harbin, investors believe that the most likely scenario is that Castlerigg will be able to sell its stake off at a small profit.
Only last month A-B had fought off a counter offer from rival international brewer SAB Miller. SAB Miller had bought up a 29 per cent stake in Harbin, but decided to sell it its share back to A-B after it said that had been outpriced.
