Carlsberg, one of the world's leading brewers, will buy a 46 per cent stake in Xinjiang Hops Co, previously the country's largest beer barley and hops producer, through its new joint venture.

Xinjiang Bluesword Brewing Investment Co, jointly set up by Carlsberg and Sichuan Bluesword Group in May, won the auction of more than 169 million shares in Xinjiang Hops on Sunday, the Shanghai-listed company said yesterday.

The shares were previously owned by Xinjiang Hengyuan Investment Co Ltd and Xinjiang Light Industry Supply & Sales General Corp, the two largest shareholders of the listed company, and were ruled by the local court for judicial auctions due to the two companies' unpaid debts.

But the statement did not disclose the deal's volume. A report in China Business Times said the investment joint venture won at a starting price of more than 12 million yuan (US$1.45 million), since there were no other bidders.

After the purchase, Xinjiang Bluesword Brewing Investment Co, in which Bluesword holds a 51 per cent stake and Carlsberg the remainder, will become the largest shareholder of Xinjiang Hops.

"One of the reasons that Carlsberg and Bluesword are buying the Xinjiang firm is for its barley and hop business," said Dong Junfeng, an industry analyst at Galaxy Securities Co Ltd.

In recent years the price of imported barley has kept increasing, putting pressure on beer makers in China.

The advantage in raw materials costs in Xinjiang Hops is likely to help the brewers lower their production costs, Dong said.

"Meanwhile, the purchase will facilitate Carlsberg's further penetration in the beer market in the country's western region," he said, adding Xinjiang Hops also has beer business in the region.

During the past two years, Carlsberg has purchased shares in Huashi Brewer and Dali Beer Group in southwestern Yunnan Province, Lanzhou Huanghe Brewery in northwestern Gansu Province, and Wusu Beer in Xinjiang Uygur Autonomous Region.

"All the deals have shown Carlsberg's ambition in the region," Dong said.

Foreign beer makers like SABMiller, Anheuser-Busch and InterBrew have been scrambling to invest in the world's largest and fastest growing beer market in recent years, through co-operation with strong local companies.

However, it is difficult to predict what lies ahead for Xinjiang Hops, Dong said.

The company has found itself in difficulties since former chairman Aikelamu Aishayoufu disappeared in November 2003, amid allegations the firm allegedly failed to disclose 27 credit guarantee transactions worth 940.8 million yuan (US$113.6 million).

Its major business - hops production - had been decreasing dramatically last year, and a loss of 207 million yuan (US$25 million) was reported for 2004.