Business

Tuesday July 14, 2009

Japanese brewer Suntory plans merger with rival Kirin


TOKYO: Japanese brewer Suntory Holdings Ltd said yesterday it was considering a merger with larger rival Kirin Holdings Co in a deal that would create one of the world’s largest beverage and food firms.

A merger would put Kirin and unlisted Suntory on par in revenue terms with US-based Kraft Foods and Pepsico Inc, and give the two more pricing power in Japan’s mature market.

“If a merger is realised, that would give them the market share to take leadership in pricing and help their soft drinks businesses – a chronic weak spot in an ultra-competitive market,” in Japan, said JP Morgan analyst Naomi Takagi.

“It’s a huge positive if they can do it.”

Suntory spokesman Naoko Tsuda said that the company was considering various options including a merger with Kirin but that nothing had been decided.

Kirin spokesman Mitsutake Matano declined comment on the possibility of a merger, repeating a statement that Kirin is working with Suntory on procurement, distribution and other business activities.

Kirin and Suntory are in talks to merge under a holding company, and aim to agree on the deal this year, the Nikkei business daily said, citing unidentified sources.

The merged firm would be the largest player in the Japanese beer and soft drink markets with combined annual sales of 3.8 trillion yen (US$41bil), giving them more resources to seek acquisitions abroad.

Kirin and Suntory together controlled 31.4% of Japan’s soft drink market in 2008, narrowly edging out Coca-Cola Co’s 29.4% share, according to the Nikkei.

Some analysts cautioned that a deal was by no means a sure thing, citing potential regulatory resistance to a merged entity that would command about half of Japan’s beer market.

“It is not at all certain that a deal is really going to happen. The hurdles ahead are by no means small,” said Mizuho Securities analyst Hiroshi Saji.

Japan’s beer market has shrunk by 15% in terms of shipment volumes over the past decade, forcing the industry to slash costs and look overseas for growth.

Earlier this year Kirin, which held 37.5% of Japan’s beer market in January-June, agreed to a US$2.5bil buy-out of Australian brewer Lion Nathan, bringing the total that the maker of Kirin Lager Beer has spent on acquisitions to 968.5 billion yen over the past three years.

Last year Suntory, which is almost wholly owned by its founding family, outmanoeuvred both Kirin and Asahi with a more than 600 million euro (US$836mil) deal for Danone’s Frucor juice unit and said it was ready to spend another US$2bil or so on acquisitions. – Reuters


For Another perspective from The Daily Yomiuri, a partner of Asia News Network, click here


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