[WSJ] Japanese Drink Makers on M&A Trail

It’s summer, setsuden is in full swing, and Japanese drinks companies are thirsty – for acquisitions.

Kirin Holdings Co. said Tuesday it will pay around US$2.56 billion to buy all outstanding shares of Brazil’s Aleadri-Schinni Participacoes e Representacoes S.A., which holds a 50.45% stake in brewer Grupo Schincariol. Schincariol produces the Nova Schin beer brand, as well as soft drinks.

Brazil is the world’s third largest beer market after China and the U.S., while Kirin has been on the M&A trail for some time as growth in its home market stagnates and the rising yen makes foreign acquisitions attractive, though it failed in an attempted merger with Japan’s Suntory Holdings Ltd. Last year, it took a 14.6% stake in Singapore’s Fraser & Neave Ltd., and through its Lion Nathan Ltd. unit it acquired some New Zealand wine brands from France’s Pernod Ricard SA for US$64 million, according to Dealogic. Kirin bought Australian brewer Lion Nathan in 2009, and has a 48% stake in San Miguel Brewery Inc. of the Philippines.

It’s also in the process of completing a joint venture with China Resources Enterprise Ltd. where Kirin will take a 40% stake in its soft drink unit for US$400 million.

The deal is the third biggest Japan outbound M&A deal in the beverages sector on record and the second-largest Japanese acquisition in Latin America on record, according to data from Dealogic. It also takes Japanese outbound M&A volume to US$46.7 billion year-to-date, more than double from the year before.

According to Euromonitor, Schincariol has been slowly losing market share to Anheuser-Busch InBev NV over the last few years. A deal with Kirin would allow it to invest to protect its market share in Brazil. And while analysts believe the price Kirin is paying is expensive, it’s a premium the company is willing to pay to get a foothold in fast-growing emerging markets.

“Whether this deal is expensive or cheap will hinge on the actual results, but at first glance, it does appear expensive,” Takuya Yamada, senior portfolio manager at ITC Investment Partners, told Dow Jones Newswires. “The deal does demonstrate the company’s unwavering stance to become a global beverage maker through M&A activity.”

Asahi Breweries Ltd. spent more than US$2 billion in the last two years on acquisitions, including Schweppes, the drinks unit of Cadbury PLC’s Australian drinks business, and a 20% stake in Tsingtao Brewery Co. Sapporo Holdings Ltd. has also said it intends to make acquisitions in North America, after it completed a tie-up with domestic soft-drink company Pokka Inc. this year.

And it doesn’t stop there. As the WSJ reports, Asahi is fighting Suntory for New Zealand-headquartered Independent Liquor Ltd., while the fate of Foster’s Group Ltd. remains up in the air.


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