SHANGHAI (Feb 7): Shareholders of Chongqing Brewery voted on Tuesday to hire independent auditors to increase transparency at the Chinese beermaker after its shares plummeted more than 60 percent recently, wiping out nearly 30 billion yuan ($4.8 billion) in value.

Shareholders, however, rejected a motion to oust the chairman of China's third-biggest brewer by market capitalisation for mismanagement that led to the sharp fall in shares in December, a company official said, confirming earlier media reports.

The move to hire the auditors was proposed by Danish brewer Carlsberg A/S, which owns nearly 30 percent of the brewer.

The free-fall was triggered by a Dec. 7 statement from the company that was interpreted by the market as suggesting a new hepatitis B vaccine failed in trials conducted by its biotech arm, Chongqing Jiachen Bioengineering. The company has not made it clear subsequently if the drug did in fact fail the trials.

Dacheng Fund Management Co, which holds about 9 percent in Chongqing Brewery, called for the shareholder meeting to consider its proposal to oust the chairman, Huang Minggui, for mismanaging the disclosure of information on its drug development.

Many retail investors should be disappointed at the outcome of the ouster vote "because the chairman is widely seen as responsible for the price tumble," said Wang Yin, an analyst at Guodu Securities Co in Beijing. "The share price had been inflated by speculation, so if the drug development fails, which is likely, there's still big room for the price to fall further."

Shareholders present at Tuesday's meeting voted 97.4 percent to keep the chairman, according to an earlier report on the website of Caijing magazine.

Chongqing Brewery said last month that Carlsberg had submitted a separate proposal to hire independent accountants to audit the Chinese brewer, although it did not give a reason for the motion.

SPECULATION OVER VACCINE

Trading in Chongqing Brewery shares has been suspended pending a company announcement to the Shanghai Stock Exchange.

Analysts say the slump in the share price was more an uncoiling of the hype over the hepatitis drug that had built up over the past decade as well as a reflection of deep-rooted problems in China's stock-trading culture.

Chongqing Brewery acquired pharmaceutical firm Chongqing Jiachen Bioengineering in 1998, a year after the brewer's initial public offering in Shanghai, as part of a plan to develop a hepatitis B drug.

The business was attractive to investors as more than 100 million people in China are reported to be suffering from the illness and the deal pushed up Chongqing Brewery's share prices to exorbitant levels.

The company's stock traded above 100 times earnings before the slump, representing an exaggerated premium to its main rivals such as Tsingtao Brewery Co , which traded at 20 times in Shanghai. Despite the fall, Chongqing Brewery shares are still trading at a PE ratio of around 50 times.

Carlsberg inherited its initial stake in Chongqing Brewery through its takeover of British brewer Scottish and Newcastle and boosted its stake in the Chinese company in 2010 to become its biggest shareholder. - Reuters

Originally posted here:
Carlsberg-invested Chongqing Brewery to hire independent auditors