Asahi Breweries is buying a 19.99 per cent stake in Tsingtao, China’s largest beer company, from Anheuser-Busch InBev, for $666.5m in the latest step by a Japanese beer company to expand overseas.

 

The investment builds on an existing relationship between the two companies, which includes a joint venture in China formed in 1997.

 

Asahi, which is Japan’s best-selling brand, is following quickly in the footsteps of Kirin, Japan’s second largest brewery, which on Monday said it had won exclusive rights to buy a 43.25 per cent stake in San Miguel Brewery of the Philippines.

 

Asahi’s latest move highlights the growing ambitions of Japanese food and beverage companies to use mergers and acquisitions to build share in growing markets amid the inexorable shrinking of their home market.

 

Japan’s beer market has been declining for the past 12 years, after peaking in 1996. Japanese food and beverage companies made 16 outbound M&A deals last year, worth $6.8bn, according to Dealogic.

 

Late last year, Asahi said it would acquire Schweppes Australia from Cadbury for A$1.185bn ($775m).

 

The group, which has been investing in China since 1993, aims to increase its overseas sales from Y55.4bn ($625m) last year to Y70bn this year.

 

A-B InBev, which is selling 20 per cent of the 27 per cent stake in Tsingtao, said it had “no current plans” to get rid of the remaining 7 per cent. The sale comes as Belgo-Brazilian brewer InBev, which completed its $52bn takeover of Anheuser-Busch last year (inheriting the US brewer’s stake in Tsingtao), dumps assets to raise cash.

 

The brewer must pay back a $7bn bridge loan, which helped finance the Anheuser acquisition, due at the end of the year. Part of the loan will be paid back using proceeds from recent bond issues, but the group has said it could raise up to $7bn by making further disposals.

 

Other assets that could be sold include Anheuser’s theme parks, worth about $2.6bn, according to Bernstein Research, and InBev’s South Korean beer business, worth about $2.2bn.

 

InBev may also sell its Beck’s beer brand, estimated to be worth $2.5bn.

 

Trevor Stirling, analyst at Bernstein, said it may be difficult for A-B InBev to sell the South Korean business because Asahi was tied up with its Cadbury acquisition and Japan’s Kirin was in talks to buy up to a 43.25 per cent of San Miguel.

 

But analysts were heartened to see A-B InBev get a good price from Asahi: the brewer paid a multiple of 14.2 times Tsingtao’s 2008 earnings. This compares to multiples of 12.4 earnings in InBev’s acquisition of Anheuser-Busch and 14.3 times earnings in Carlsberg and Heineken’s takeover of UK brewer Scottish & Newcastle.