By Ned Levin And Chester Yung
HONG KONG--Hong Kong-listed China Resources Enterprise Ltd. said
Tuesday it is slimming down its holdings, including a loss-making
tie-up with British supermarket Tesco PLC, so it can focus on its
top-selling Chinese beer brand.
China Resources is selling all its non-beer operations to its
parent in a HK$28 billion (US$3.6 billion) deal, buoying the
long-embattled stock to its highest level since August 2014.
The parent company China Resources Holdings was in the limelight
last year after its former chairman, Song Lin, was ousted as part
of a corruption investigation.
In a news release, Mr. Song's replacement Fu Yuning called the
deal a "strategic transformation of [China Resources Enterprise]
into a beer-focused company, as the leading brewer in China."
Snow Beer, which China Resources brews in a joint venture with
the U.K.'s SABMiller PLC, is China's biggest-selling beer, and thus
also the world's biggest in sale volume. It is only sold in
China.
China Resources' announcement of its sale of its non-beer
businesses, which include supermarkets and coffee chain Pacific
Coffee, to China Resources Holdings drove up the long-embattled
shares of the Hong Kong unit. The shares resumed trading Tuesday
after a halt on April 8. By late Tuesday morning, they were up 52%,
at their highest levels since last fall. The company said hard
times for retail had taken a toll on its share price.
"The share price of the company has continued to underperform
the broader Hang Seng Index. Most notably, non-beer business
segments of the company has been confronted by macroeconomic
headwinds as well as a challenging operating environment," the
company said in its announcement of the deal.
China Resources Holdings also announced it would buy up to 10%
of its subsidiary's shares for HK$12.70 per share.
The deal makes the Hong Kong-listed company a sole beer play,
focusing on selling Snow Beer.
It also flips on its head a recent trend of big state-owned
firms pumping more assets into their Hong Kong-listed units in the
name of bringing in more outside investors to long-sclerotic
companies.
In April 2014, the company's former chairman Song Lin was
stripped of his position as the firm's Communist Party chief as
part of a corruption investigation. He was replaced by current
chairman Mr. Fu, who had been the chairman of state-owned
conglomerate China Merchants Group.
The non-beer businesses had total assets of HK$123.59 billion as
of the end of December. China Resources Enterprise will pay a
special cash dividend of HK$11.50 per share, which its parent will
use to pay for the assets.
Write to Ned Levin at ned.levin@wsj.com and Chester Yung at
chester.yung@wsj.com
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