Tibet/China: Carlsberg sues joint venture partner

Carlsberg Group has initiated legal action against Tibet Development Co. for impeding the sale of its 50 percent stake in Tibet Lhasa Brewery Company Ltd, according to a report from Shanghai Securities News. Carlsberg, along with the buyer Daohe Industrial, has filed a lawsuit demanding Tibet Development's cooperation in facilitating the equity transfer's business registration procedures.

Tibet Development Co. and Carlsberg are the joint owners of Tibet Lhasa Brewery Company Ltd., the world's highest commercial brewery located at 11,975 feet in elevation. It is the only beer manufacturer in the Tibetan Autonomous Region and one of the 66 national key enterprises supported by the country.

Lhasa Brewery was founded in 1989 in Lhasa/Tibet. In February 2004 Carlsberg and Tibet Development established a joint venture with an equal share split, with Carlsberg investing approximately USD 23 million in Lhasa Beer.

However, a source close to Carlsberg revealed that despite the 50:50 share split, the Danish company has limited influence over Lhasa Beer's operations and management. The source mentioned that Lhasa Beer has not held any directors' meetings since 2018 and that the two directors appointed by Carlsberg are merely nominal figures.

The dispute between the two parties is likely to have peaked in 2018 when Tibet Development failed to pay a dividend of CNY 95 million (USD 13.4 million) to Carlsberg, as reported in its earnings report. Carlsberg has been unsuccessful in obtaining a written explanation regarding the missing payment from Lhasa Beer since June 2020.

The violation of information disclosure has even caught the attention of authorities, with the Shenzhen Stock Exchange initiating an inquiry into Tibet Development after receiving complaints from investors. The exchange has requested Tibet Development to clarify its governance of Lhasa Beer concerning the dividend issue.

Tibet Development did not exercise its right of first refusal within the designated 30-day period after being notified about the planned stake sale in late March. Consequently, Daohe already paid Carlsberg for the assets on May 4. However, the remaining shareholder has not fulfilled its obligation to disclose the planned deal to the public.

Public data reveals that as of December 31, 2022, Lhasa Beer possesses total assets amounting to CNY 656 million (USD 92.5 million), accounting for nearly 77 percent of Tibet Development's total assets. Tibet Development generated CNY 277 million (USD 39m) in revenue last year, with the majority of it originating from Lhasa Beer.

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