• A can of Tsingtao beer is displayed by a clerk at a food market.

A can of Tsingtao beer is displayed by a clerk at a food market. (Photo : Getty Images)

Danish beer maker Carlsberg A/S is eyeing a 20 percent stake, worth about $1.2 billion, in China's Tsingtao Brewery Co. being sold by Asahi Group Holdings Ltd.

The Copenhagen-based company is working with an adviser on a potential bid but no final decision has been made.

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The price is based on the current stock value in Hong Kong.

Carlsberg A/S may be trying to negotiate better terms from Asahi such as seeking a board seat in Tsingtao or specific distribution targets, according to Hong Kong-based Jeremy Yeo, an analyst at Mizuho Securities Asia Ltd.

Akiyoshi Koji, president of Asahi, the largest Japanese brewer, said last month that it will decide this year on options for its minority stake in Tsingtao holding. He felt that it doesn't make sense to own the shares without control of it.

The potential tie-up with Carlsberg could help Tsingtao Brewery Co., based in a port city in eastern China's Shandong province, in its competition with Snow lager and Anheuser-Busch InBev NV's Budweiser label being sold by China Resources Beer Holdings Co.

Yeo said that Tsingtao had to face competition on multiple fronts and getting overwhelmed. He noted that the Carlsberg tie up is the best chance that the beer manufacturer has had in ten years.

Cristobal Garcia, a managing director at Sanford C. Bernstein & Co. in Hong Kong, said that since Carlsberg has no strategy for penetrating eastern China and is the only company that would consider a non-control stake, it is the "natural buyer."

Brewers are trying to capture China's higher-spending drinkers interested in premium labels as the country's consumption of the beverage has declined amid a slowing economy. The Chinese beer market has shrunk 6.2 percent from 2013 to 2015, according to Euromonitor International data.

Interestingly, Carlsberg also owns around 60 percent of Chinese brewer Chongqing Brewery Co., a rival of Tsingtao Brewery Co. It is also selling its own brands such as Carlsberg Beer, Tuborg, Kronenbourg 1664 Blanc in China.

Carlsberg A/S has also been pursuing a stake in Vietnam's Hanoi Beer Alcohol Beverage Corp. to boost its presence in emerging markets.