Belgian-based InBev, which produces Stella Artois and Beck's beer brands, will be the second-largest brewer in China after it completes its purchase of the country's Sedrin Brewery in two years.

The acquisition, which will cost the European brewer 5.89 billion yuan (US$740 million), is the largest merger and acquisition case in the history of China's brewery industry.

China, the world's largest beer market, has long been a hot destination for foreign beer investors, including Anheuser-Busch, SABMiller and Heineken.

"This transaction is a very significant step in our strategy and strongly reinforces both our leadership position and footprint in Southeast China," said Carlos Brito, InBev CEO.

Sedrin will be a potential national and export brand for InBev.

"The Sedrin brand will be one of InBev's top-five selling brands globally by volume with significant potential for growth and expansion," said Brito.

Upon completion of the transactions, InBev will become one of the largest brewers in China with nearly 35 million hectolitres of sales.

The deal will move InBev to second place in China, likely overtaking No 3's China Resources Brewery which is partially owned by SABMiller.

Tsingtao Brewery, based in Qingdao of East China's Shandong Province, in which Anheuser-Busch holds 27 percent, leads the pack by 13 percent of the market share.

Sedrin is the leading brewer in East China's Fujian Province, taking 45 percent of beer business in the area in 2004.

The same year, it also grabbed 18 percent of nearby Jiangxi Province's market.

The total capacity of Sedrin's three breweries is approximately nine million hectolitres.

InBev seized the No 1 beer market position in the three coastal provinces of Guangdong, Zhejiang and Fujian after it entered China in 1997.

Merger and acquisition prices in China's beer industry are getting higher as foreign investors increase, while the number of qualified local brewers is getting smaller, said Wang Qi, secretary-general of the China Brewing Industry Association.

InBev is buying the domestic business at 13 times its 2005 earnings before interest, tax, depreciation and amortization. The practice is broadly in line with recent industry deals.

After the peak in mergers and acquisitions eases, foreign beer companies should greatly improve their profit margin in the Chinese market, according to Wang.

(China Daily January 25, 2006)