Word: a-b
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...Last week, Anheuser-Busch, the world's No. 1 brewer by volume, announced its intention to buy 29% of Harbin Brewery. SABMiller, A-B's nemesis (formed in July 2002 when South African Breweries bought out the Wisconsin-based Miller Brewing Company), retaliated by declaring that it would launch a $391 million hostile takeover bid for Harbin. The prize is a company that made a profit of just $15 million last year but that offers a coveted entr?e into the beer-loving northeast of China...
...with a loss of more than $125 million) and Becks' (the company left China soon after). Those that stayed have shifted strategies. SABMiller doesn't produce its top brands, Miller Lite and Miller Genuine Draft, in China. Instead, it buys into Chinese breweries and helps them upgrade. A-B produces Budweiser in central China and has turned it into one of the country's best-known foreign beers; it also has a 10% stake in Tsingtao; and it's now negotiating for stakes in smaller Chinese breweries. Other foreign companies are following. World No. 3, Interbrew, has management control...
...Despite the abundant risks of investing in China, it's not hard to see why SABMiller and A-B are so keen to get their hands on Harbin Brewery. Recent years have seen lackluster sales in the U.S., whereas China has emerged as the world's last great growth market for beer. With SABMiller already owning a stake in another large brewery in a neighboring province, A-B saw the danger that its arch rival might become the region's dominant player...
...That fear heightened in March, when SABMiller bid for an additional 29% of Harbin Brewery's government-owned stock. That would have given SABMiller control of the company and its premium brand, Hapi?potentially a national rival to Budweiser, which A-B also markets as a premium beer...
...Busch - No. 1 in the world, which has fat profit margins in the U.S., where it gets more than 80% of its sales. At one time, the company had ruled out European acquisitions, but rivals think they'll get involved and the company is no longer adamantly denying it. A-B has been fighting with the Czech Republic's Budvar brewery over the name Budweiser for years; in recent weeks, courts in Japan, Lithuania, Spain and Taiwan have all found against A-B. Analysts say a German acquisition wouldn't come as a surprise. And Denmark's Carlsberg has been...