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Wine maker Changyu eyes Evergrowing slice

By Ding Qingfen (China Daily)
Updated: 2010-01-09 07:45

Wine maker Changyu eyes Evergrowing slice

An Evergrowing Bank outlet in Nanjing. Changyu paid 1.02 billion yuan for a 5 percent stake of the bank.?[China Daily]

Wine maker Yantai Changyu Pioneer Wine Co Ltd, on Friday said it was spreading its wings to the financial sector by acquiring a 5 percent stake in Shandong Evergrowing Bank for 1.02 billion yuan ($149 million).

Changyu will buy 340 million new shares issued by Evergrowing Bank, at a price of 3 yuan per share, the Shenzhen-listed company said.

The bank's board of directors is expected to take a decision on the deal within a month. If the deal is finalized, Changyu will end up with a 5 percent stake in Evergrowing Bank.

Market analysts said the deal would be 'profit accretive' for the listed wine maker.

"This is a reasonable deal. Changyu has enough funds to invest, while Evergrowing Bank has a good profit record. So it is a win-win deal for both firms," said Huang Wei, a food and beverage analyst with China Jianyin Investment Securities.

Changyu executives were immediately not available for comments when contacted.

Shares of Changyu ended at 72.5 yuan on Thursday, and have risen nearly 50 percent last year. The company's shares were suspended from trading in Shenzhen on Friday, and will resume after a month.

Changyu had cash flows of nearly 1.96 billion yuan by the end of last September.

Shandong Evergrowing Bank saw its deposits surge nearly 35 percent in 2008 to 88.1 billion, while profits rose 86 percent to 1.17 billion yuan. The 2009 figures are yet to be released.

"For Changyu, the stake buy is more profitable than ordinary bank deposits," said Huang.

The stable profitability of financial firms has caught the fancy of many consumer goods companies. The country's leading suit producer Youngor has invested in insurance and securities companies.

Thanks to the economic recovery and the stimulus programs to boost domestic consumption, wine consumption is set to increase this year, said industry experts.

China has surpassed Japan as Asia's largest wine consumer, and is set to become the third largest player in the world over the next three years.

During the third quarter of 2009, Changyu's sales grew by 32.1 percent to 981 million, compared with 15.08 percent growth in the first nine months.