OREANDA-NEWS. February 13, 2013. China Resources Snow Breweries Limited (“CR Snow”), a 51% owned subsidiary of China Resources Enterprise, Limited (HKEx: 00291) (“CRE”), and Kingway Brewery Holdings Limited (HKEx: 00124) (“Kingway Brewery”) jointly announce that they have entered into a transaction agreement involving Kingway beer business, reported the press-centre of CRE.

CR Snow will acquire Kingway Brewery’s business in relation to beer production, distribution and sales, and including the related shareholder’s loans and debts, for a total consideration of RMB5.38 billion. The assets involved include seven breweries in Chengdu, Dongguan, Foshan, Shantou, Tianjin, Xian, and Shenzhen Plant 2 with a combined production capacity of 1.45 million tonnes.

Kingway Brewery will retain the plot of land held by Shenzhen Plant 1 situated at Buxin Area, Luohu District, Shenzhen to develop commercial properties (please refer to the “Buxin Project” for further details). Upon completion of the transaction, Kingway Brewery will cease its beer business as soon as possible and will undergo a strategic transformation to focus its business on property development and investment, and is set to change its name to “Guangdong Land Holdings Limited”.

Among the sale proceeds, approximately HKD2.1 billion will be used to finance the Buxin Project, approximately HKD 1.2 billion will be applied for the future acquisition of land and other property development projects in China, and approximately HKD 1.9 billion will be used to pay for the taxation, costs, expenses in relation to the transaction and for general working capital purpose. The Board of Kingway Brewery has proposed allocating approximately HKD 1.7 billion from the sale proceeds as a special dividend to be distributed to its shareholders, representing HKD 1.0 per share. The said proposal is subject to shareholder’s approval at the special general meeting.

In 2011, the sales volume of Kingway Brewery amounted to approximately 934,000 tonnes, generating total revenue of HKD 1.7 billion, and a combined production capacity of 1,450,000 tonnes with the application of relevant assets in the transaction. During the same period, CRE’s beer division recorded sales volume of 10,235,000 tonnes, generating revenue of approximately HKD 26.689 billion. Upon completion of the transaction, the aggregate annual production capacity of CRE’s beer division will increase from over 17,000,000 tonnes as at the end of 2012 to over 18,450,000 tonnes.

Mr. Chen Lang, Chairman of CRE, said, “Kingway Beer owns quality asset and is a widely recognised brand enjoying a strong market share with an extensive sales network and established manufacturing facilities in China, especially in Guangdong Province. We are delighted to have Kingway Beer join the CRE family. The transaction not only strengthens our production capacity and economies of scale, but also further optimizes the sales network of CR Snow in China. This continues to enhance our leading position in China’s beer industry.”

Mr. Huang Xiaofeng, Chairman of Kingway Brewery said, “We are delighted to reach a win-win agreement with CRE. Handing Kingway Brewery’s beer business and brands to an organization as strong and reputable as CRE will ensure that Kingway Brewery will have more room to grow and achieve good results once more. The sale of the brewery business is a good opportunity for us to monetize our assets at an attractive price, which has enhanced our financial position to support our strategic transformation towards a focus on property development and investment in China, which is in the interests of all shareholders. Urbanization is being used to promote modernization as a historic mission, while Guangdong province is also actively advocating the sector redevelopment and urban transformation strategy. This will lead to positive and strategic development opportunities in China’s property sector. The Buxin Project has its unique economic and geographical advantages. Coupled with the strong support from the government policies on business transformation and redevelopment as well as our professional team with extensive experience in the property sector, we are confident of our strategic transformation.”

J.P. Morgan Securities (Asia Pacific) Limited and HSBC are financial advisors to CR Snow and Kingway respectively.