China Resources Enterprise Ltd, a partner of SABMiller Plc, will acquire 80 percent of Pacific Coffee Group, Hong Kong's second-biggest coffee shop chain, as it expands its consumer businesses.
China Resources' Festive Wise Limited unit will pay HK$326.6 million ($42 million) to Chevalier Pacific Holdings Ltd for the stake, according to a statement from Chevalier.
State-controlled China Resources, the nation's biggest beer maker, is concentrating on consumer businesses to tap increasing spending in China after selling its holding in a textile venture last year. Pacific Coffee has 83 outlets in Hong Kong, trailing only Starbucks Corp.
"The profit contribution from this acquisition will be limited in the short run; still, it's a good buy for strategic development," Kenny Tang, a Hong Kong-based analyst at Redford Assets Management Ltd, who rates the company "buy," said by phone yesterday. This "will help to raise the company's image, as it's shifting its focus on the more high-end market."
The purchase by China Resources will let Pacific Coffee gain greater consumer recognition in China and "seize a bigger market share in a more efficient manner," Chevalier said in a statement.
Chevalier Pacific, 54 percent held by Chevalier International Holdings Ltd, will retain 20 percent of Pacific Coffee, the statement said.
"China Resources would like to diversify along food and retail, and now they want to take an established Hong Kong brand to explore the Chinese mainland market," Keith Li, an analyst at CIMB-GK Securities (HK) Ltd, said in a phone interview yesterday. "It's still early to say whether the company could successfully maximize the interest to shareholders, as Pacific Coffee may not be as profitable as Starbucks," Li said.
Pacific Coffee had net assets of HK$1.2 million at the end of March, or HK$79.4 million if capitalization and forgiven loans from a reorganization are taken into account, the statement said.
Pacific Coffee was founded by US technology executive Thomas Neir, opening its first outlet in 1992. It has 90 coffee shops: 83 in Hong Kong, four in Singapore and three in Chinese mainland, the statement said. It has five franchise shops, in Malaysia, Macau and Chinese mainland.
Starbucks, with 380 branches in Chinese mainland and more than 100 in Hong Kong, won't comment on the deal, spokeswoman Caren Li said by phone from Shanghai yesterday. Starbucks is the biggest specialty coffee company in China, Li said.
