Investment in medicine maker to go through
By Zhang Jin (China Daily)
Updated: 2004-05-17 08:51

Hong Kong-based China Resources (Holding) Co Ltd (CRC) is moving steadily toward its 51 per cent stake of leading mainland traditional medicine producer Dong-E-E-Jiao Group, as agreed by the two sides in September.

"Preparatory work is being carried out smoothly," Shandong Dong-E-E-Jiao Co Ltd, the group's listing arm at the Shenzhen Stock Exchange, said in a statement.

A report about the current development of the acquisition will be submitted to the provincial and central State-assets supervisory bodies for approval, Dong-E-E-Jiao President Liu Weizhi was quoted as saying.

The group is a State-controlled enterprise. September's letter of intention said CRC would spend 300 million yuan (US$36.28 million) to take the majority stake in Dong-E-E-Jiao.

Through the investment, CRC will also indirectly control 15 per cent of Shandong Dong-E-E-Jiao, making it the biggest shareholder.

It is also reported that CRC wants to list the company in Hong Kong in three years. Dong-E-E-Jiao has not confirmed the rumour.

Wang Peng from Dong-E-E-Jiao's securities department told China Daily that it is not known when the final approval will be given, denying a claim on the Internet that the deal will be closed in three to four months.

Analysts say the deal will help CRC have a larger impact on the mainland's competitive healthcare market.

Dong-E-E-Jiao sells about 80 per cent of China's ejiao, a traditional health enhancing medicine that is extracted from donkey skin.

Meanwhile, the alliance will help Liu realize his ambitious plan to make a foray into southern Asia, where traditional Chinese medicines are popular.

Liu told China Daily in early March that the company's core task this year was to explore the international market.

"Currently, we are quite weak overseas," he said, believing the situation would improve.

Dong-E-E-Jiao has had a presence in Malaysia and Germany. It is also seeking donkey skin from abroad, said Liu.

Sources revealed that Dong-E-E-Jiao wants to establish a donkey farm in Australia. Its expansion will be stepped up after the acquisition is completed, as the company is rich in capital and boasts a global sales grid.

Analysts say the move will also help CRC enhance its presence in eastern China's beer market.

Dong-E-E-Jiao has an affiliated beer company, which has been in the red for two years.

CRC made its first inroad into the vast East China market two months ago, swallowing a 70 per cent stake of Zhejiang Qianjiang Beer Group, a leading brewer in Zhejiang Province.

After linking up with Dong-E-E-Jiao, CRC may have a production base in Shandong, where the mainland's largest brewer - Tsingtao Beer - is based.

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