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Contesting summons served by DFH and
initiates arbitration proceedings against NAC for
various breaches of Joint Venture agreement
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China business remains on track with
international premium strategy driving organic
growth
Asia Pacific Breweries Ltd (APB) announced today, that
the proposed sale of its 50% owned Heineken-APB (China)
Pte Ltd (HAPBC) to China Resources Snow Breweries Limited
(CRSB) could not be completed as it was unable to reach
an agreement after its latest round of discussions with
CRSB. The proposed divestment comprised HAPBC's 49%
interest in Jiangsu Dafuhao Breweries Co, Ltd (DFH) and
100% of Shanghai Asia Pacific Brewery Company Limited
(SAPB).
Mr Roland Pirmez, Chief Executive Officer, APB commented,
"While we are disappointed that the sale to CRSB fell
through, this has by no means affected our operations
within China. We remain on track with our International
Premium Brand Strategy as our higher margin Tiger and
Heineken brands record growing volumes in China."
The divestment of DFH and SAPB is in line with APB's
restructuring efforts in China as it focuses on its
International Premium Brand Strategy. Despite receiving
unconditional approval by the PRC authorities, CRSB
decided to terminate the agreement on the basis that it
would not be completed given the summons raised by DFH.
HAPBC is contesting the summons served
by DFH (as being groundless
and without merit), including
challenging the jurisdiction of the Nantong Intermediate
People's Court over the matters raised in the summons.
In light of the termination of the sale, APB expects a
negative impact of approximately S$8.5 million due to
transaction costs and operational losses from sale assets
from October 2011 to March 2012.
Separately, HAPBC has initiated arbitration against
Nantong Fuhao Alcohol Industry Co., Ltd (NAC) at the
China International Economic and Trade Arbitration
Commission in Beijing and is claiming against NAC for
various breaches of the JVA, including but not limited
to:
- Refusal to provide HAPBC with
financial information of DFH;
- Refusal to
cooperate with HAPBC for
HAPBC to conduct an audit
on DFH pursuant to the JVA;
- Acting in furtherance of NAC's
interest to the detriment of DFH in relation to the
relocation of DFH's main factory in Tongzhou; and
- Acting unilaterally without
HAPBC's approval in relation to material DFH matters.
In light of the above, APB is unable to determine either
the financial position or valuation of DFH and considers
it prudent to make a provision for the impairment of
APB's 50% share of the total book value of DFH. This
amounts up to approximately S$30.0 million.
"This provision for the impairment of DFH removes the
last piece of uncertainty in our China minority
shareholdings; thereby freeing us to solely concentrate
on our next level of growth in China via our
International Premium Brand Strategy," he continued.
This release should be read in conjunction with the
Company's announcement on SGX.
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