Carlsberg seeks auditors for Chinese brewery
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- Published on Thursday, 02 February 2012 12:09
CHINA – Amidst allegations of mismanagement and slumping share prices, Carlsberg is seeking to have independent accountants audit Chongqing Brewery Co Ltd, of which it owns 30%.
This latest shareholder action against Chongqing Brewery, China’s third largest brewer by market capitalization, comes as the company's share prices dropped 70% in the past two months, erasing nearly US$4.8 billion (RMB30 billion) in value.
Two weeks ago, Chongqing Brewery said in a statement posted on the Shanghai Stock Exchange that it forecast a 50% decrease in its 2011 net profit.
The entire affair was triggered by a statement from the company on 7 December 2011 that was interpreted by the market as suggesting failed results from the trial of a new hepatitis B vaccine conducted by its biotechnology subsidiary Chongqing Jiachen Biotechnology.
Another Chongqing Brewery shareholder, Dacheng Fund Management Co – which owned a more than 10% stake in the company before selling some of it last quarter – has called for a shareholder meeting on 7 February to take up its proposal to remove chairman Huang Minggui for mismanagement of information disclosure.
At the meeting, Carlsberg will also seek approval to hire independent auditors.
Analyst group Sanford Bernstein estimates that each 10% drop in Chongqing Brewery's share price wipes US$1.05 (DKK6) off Carlsberg's share price, in theory.
The Danish brewer inherited its initial stake in Chongqing Brewery when it acquired UK’s Scottish and Newcastle. In 2010, Carlsberg increased its stake in the Chinese company to become its biggest shareholder.
In August 2011, Carlsberg, Chongqing Brewery and Chongqing Light Textile Holdings (Group) Co Ltd formed a joint venture of stakes 30%, 51.24% and 18.58% respectively.
As part of the agreement, Carlsberg made a cash contribution of about US$31.7 million (RMB200 million), while Chongqing Brewery contributed its ownership of seven breweries. Chongqing Light Textiles was tasked to operate 12 breweries in Chongqing, Sichuan, Guangxi, Guizhou and Hunan provinces.
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