Manila, July 31, 2003 By Zinnia B. Dela Peńa (Star) Food and beverage giant San Miguel Corp. is in talks to acquire the China-based beer breweries of Malaysian conglomerate Lion Group as part of its expansion in the Asia-Pacific region.

"We confirm that we have been in discussions with Malaysia’s Lion Corp. but no agreements have been reached," SMC corporate information officer Ferdinand Constantino said in a disclosure to the Philippine Stock Exchange yesterday.

The Lion Group has 11 joint venture brewery plants in Zheijiang, Jiangsu, Hunan, Hubei and Shandong in China, with a total production volume of 1.6 million tons per annum. Its investment in China’s brewery industry represents one of the largest investments by the group in China.

On the other hand, SMC already has four breweries in China, the world’s biggest producer of beer by volume. With rising Chinese consumption, the country has toppled the US as the world’s biggest beer market last year.

JP Morgan Chase & Co. is reportedly advising SMC on the proposed deal.

Last month, beer giants Anheuser-Busch Cos. SABMiller Plc. and Carlsberg A/S have expanded in China to further enhance their revenue stream with their presence in the huge market.

The Lion Group, which owns Malaysia’s largest public steelmaker and is one of the nation’s biggest investors in China, is trying to sell assets to pare down some $2.3 billion of debts left over from the 1997-1998 financial crisis. The group also assembles Suzuki vehicles, develops property and manufactures chocolate.

The Lion Group’s key assets in Malaysia are two steel mills with a capacity of three million tons a year, a SMC sets forest concession in Sabah that is four times the size of Singapore, and the Silverstone tire-making business. In addition Lion has 26 Parkson department stores in Malaysia and 13 stores in China.

SMC has earmarked $500 million for its planned investments and acquisitions in the Asia-Pacific. Apart from China, other countries targetted for further expansion are Australia, Indonesia, Vietnam, Cambodia, Thailand, and Malaysia.

"SMC sees a wealth of opportunity in the Asia-Pacific. Supported by a strong domestic business, the Philippines’ largest beverage, food and packaging company is ready for the next stage of growth. We want to grow from being the nation’s premier consumer products corporation to a leading Asian enterprise," SMC chairman Eduardo "Danding" Cojuangco Jr. earlier said in his report to stockholders.

"We believe our investments in these markets will help our operations overall. There is a market in the region for SMC products. In turn, these countries also have products that we can bring to the Philippines through San Miguel’s distribution and logistics network, he added.

SMC’s beer sales volumes in Vietnam, North China and Australia were up by 65 percent, 25 percent and 13 percent respectively in 2002 over the previous year. Beer exports alone grew by 8 percent in 2002. More than 3,600 employees work in the region for SMC, while the company’s brands, led by flagship product. San Miguel Pale Pilsen, are currently sold in over 30 export markets.

SMC is also strategically leveraging the experience and strong brand equity already established in China, Vietnam and Indonesia. In Australia, China and Indonesia for instance, SMC has capitalized on the success of local brands J. Boag, Blue Star, and Anker Bir.

Reported by: Sol Jose Vanzi

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