The deal would further consolidate China's beer industry, following Tsingtao Brewery's acquisition of Shandon Xin Immense Brewery in December 2010 for 1.87 billion yuan ($297 million). The deal would allow the companies to expand distribution together, but state control of the beer industry has limited consolidation, said Dow Jones.
China Resources Snow Breweries Ltd. and Belgium-based Anheuser Busch InBev NV were also bidders for Kingway, which is a subsidiary of government-owned Guangdong Holdings Group.
The Netherlands-based Heineken bought a 21 percent stake in Kingway in 2004 through a subsidiary.
Shares of Kingway were down 1.89 percent to 2.60 Hong Kong dollars at Friday's close. Shares of Yanjiang were up 0.89 percent to 15.85 yuan.