ST. LOUIS – Anheuser-Busch Cos. (BUD) said Monday it has nearly tripled its equity stake in Tsingtao Brewery Co. (search), China's biggest brewer, as the maker of top-selling Budweiser and Bud Light tries to overcome stagnancy in its U.S. business.
The biggest U.S. brewer raised its 9.9 percent stake in Tsingtao to 27 percent by swapping $145.6 milliion of Tsingtao convertible bonds for 248.2 million newly issued H-class shares.
As a result, Anheuser-Busch will be allowed to nominate a second director to Tsingtao's board and have its voting interest in Tsingtao increased to 20 percent.
In a separate announcement Monday, Tsingtao said its net profit rose 16.4 percent to 285.2 million yuan ($34.45 million) in 2004 from the previous year on strong demand from the booming Chinese economy. Tsingtao did not give a figure for the previous year.
Anheuser-Busch's raised stake in Tsingtao is part of a deal reached two years ago that called for the St. Louis-based brewer to raise its 4.5 percent interest in the Chinese brewer to 9.9 percent initially, then to 27 percent over seven years. Anheuser-Busch had held its previous stake in Tsingtao since 1993.
In China, Tsingtao has 50 breweries in 18 provinces and cities, last year reigning as that country's leader in beer volume, production, market share and sales.
The Chinese government remains the largest shareholder in Tsingtao, holding a 30.6 percent share; Anheuser-Busch is the largest nongovernment stakeholder.
Anheuser-Busch shares fell 10 cents to $45.90 in morning trading Monday on the New York Stock Exhange, near the lower end of their 52-week range of $45.45 to $54.74.
Monday's announcement came nearly a year after Anheuser-Busch edged out London-based rival SABMiller PLC (search) in a bidding war for north China brewer Harbin Brewery Group Ltd. (search), a century-old beermaker. SABMiller responded with plans to build a new brewery in southern China.
The fight over Harbin Brewery reflected the surging foreign interest in China's beer industry, which surpassed the United States in 2002 as the world's biggest. Some 60 foreign beermakers have joint ventures or other investments in China, but the market is fragmented and few have prospered.
U.S. brewers increasingly have pursued expansion overseas as the domestic market has flattened. Last week, Anheuser-Busch cut its earnings forecast for 2005 for the second time this year, citing weaker-than-expected U.S. beer volume in the first quarter.