By Malcolm Foster and Julie Zhu
TOKYO/HONG KONG (Reuters) - Chinese conglomerate Fosun International <0656.HK> is taking a large chunk of Tsingtao Brewery Co <600600.SS> <0168.HK> after Japan's Asahi Group Holdings <2502.T> said on Wednesday it would sell its entire 19.9 percent stake for a total of 106 billion yen ($937 million).
Asahi said in October it was considering selling its stake in Tsingtao, China's second largest brewer which was founded in 1903 by German and British merchants. Asahi is drawing back from China to focus more on Europe and other Asian markets.
China is the world's largest beer market by sales, but profits have been harder to come by amid fierce competition between local brewers and global beer giants AB InBev <ABI.BR>, Heineken NV <HEIN.AS> and Carlsberg <CARLb.CO>.
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Asahi has agreed to sell most of its stake -- about 243 million shares, equivalent to a 17.99 percent stake -- to Fosun and its subsidiaries for HK$6.6 billion ($844 million), Asahi and Fosun said in separate statements.
The remainder, around 27 million shares, will be sold to state-owned Tsingtao Brewery Group for HK$735 million, Asahi said.
The sale price of HK$27.22 per share was at a 32 percent discount to Tsingtao's last closing price of HK$40 in Hong Kong on Wednesday. The transaction is expected to close in the first quarter of 2018, Fosun said.
"Fosun has been able to pick up the shares at a fairly significant discount," said Ben Cavender, Shanghai-based principal at China Market Research Group, adding there was room to grow both at home and overseas if Fosun could help Tsingtao move up-market.
"China's beer market is going through a reinvention right now as younger consumers shift towards more niche brands. Tsingdao is kind of an outlier because it has mass scale and volume but is also looked upon as being more premium than other domestic beer brands."
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Asahi's decision to divest its stake in Tsingtao, which it acquired in 2009 for around $666 million, follows its announcement in June of the sale of its 20 percent stake in China's Tingyi-Asahi Beverages Holding Co Ltd for $612 million.
The maker of Japan's best-selling beer, Asahi Super Dry, has been increasingly focusing on Europe, and bought a group of eastern European beer brands from Anheuser-Busch InBev <ABI.BR> last year for 7.3 billion euros ($8.7 bln).
Its exit from Tsingtao will make Fosun the second largest shareholder in Tsingtao after Tsingtao Brewery Group.
It comes as a handful of Chinese conglomerates including Fosun have turned their sights back on the domestic market amid a crackdown by Beijing on eye-catching overseas ventures.
Cavender said the deal would likely go down well with Chinese regulators because it was "an example of Fosun coming home and investing in a Chinese asset" rather than overseas.
"Tsingtao is both a leading brewery in China, and a leading Chinese brand that has successfully penetrated the international markets," Fosun Chairman Guo Guangchang said in the company's statement.
Fosun's business model and global reach would help grow Tsingtao's brand and tap into Chinese demand for more premium beers, he added.
Fosun, one of China's most prolific deal-makers headed by billionaire Guo, is best known outside the country for its portfolio of businesses including French resort chain Club Med, margarine maker St Hubert and Portugal's largest listed bank Millennium bcp.
The firm is also in exclusive talks to take a majority stake in luxury Italian lingerie group La Perla.
Like other Chinese conglomerates such as Dalian Wanda and HNA Group, Fosun has dialled back on some ambitions abroad as Beijing has stepped up scrutiny of outbound deal-making, notably in sectors such as property, hotels and entertainment.
Fosun has since pared back its foreign real estate portfolio. It sold off a Sydney office tower for A$142.5 million ($109 million) this week and is also selling Lloyds Chambers in London.
($1 = 113.1500 yen)
($1 = 7.8234 Hong Kong dollars)
($1 = 0.8441 euros)
($1 = 1.3038 Australian dollars)
(Reporting by Malcolm Foster in TOKYO and Julie Zhu in HONG KONG; Additional reporting by Lee Chyen Yee in SINGAPORE and Adam Jourdan in SHANGHAI; Editing by Susan Fenton/Keith Weir)