China's oldest liquor producer eyes back-door listing
(Reuters) - Shaanxi Dukang Group, the maker of China's oldest named liquor, plans to take over a listed company in Shenzhen for a back-door listing in 2011, its chairman, Zhang Hongjun, told Reuters.
"We are narrowing the targets to two, and the deal is expected to be completed soon," Zhang told Reuters in an interview on the sidelines of the Boao Forum for Asia, a gathering of political and business leaders on the Chinese island of Hainan.
He declined to name the targets.
Dukang plans to raise funds to finance a new plant that would cost some 600 million yuan ($91.9 million), he said.
The company that produces bajiu, a distilled liquor, is struggling to meet strong demand as wealthier Chinese consumers are spending more on food and beverages, Zhang said.
China's baijiu industry produces not only the fiery drinks but also top listed companies in China's A-shares market, such as Kweichow Moutai and Wuliangye .
"Our gross profit margin last year was 55 percent," Zhang said.
Zhang's company just completed a private placement by selling a 22 percent equity stake to CITIC International Assets Management and other two domestic investors.
The name of Dukang is the Chinese version of Bacchus, and it is also a household brand in China thanks to a poem attributed to Cao Cao, a general who lived 1,800 years ago, which reads "what can unravel these woes of mine? I know but one drink named Dukang."
But now, Shaanxi Dukang is only a small and regional player in China's baijiu market.
"The baijiu market is still in the process of expanding, and there are many chances for small local! bajiu b rewers to grow," said a baijiu industry analyst, who declined to be named.
"But risks of over-capacity are certainly worth noting," the analyst added.
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