14 July 2009

Japanese brewers working on merger deal

What is on tap in the Japanese beer market? It could be the merger of two of the country's biggest brewers as Suntory Holdings Ltd said it was considering a merger with larger rival Kirin Holdings Co.

A merger would put Kirin and Suntory on par in revenue terms with U.S.-based Kraft Foods and Pepsico Inc.

Suntory said the company was considering various options including a merger with Kirin, but nothing is concrete, a spokesperson said.

At first a Kirin spokesperson declined comment on the possibility of a merger, saying only Kirin is working with Suntory on procurement, distribution, and other business activities.But later in a brief statement, Kirin described discussions as being at ''at an initial stage.'' No agreements have been reached yet, it said.

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

The merged firm would be the largest player in the Japanese beer and soft drink markets and one of the largest worldwide, with combined annual sales of $41 billion (3.8 trillion yen).

If the deal does go through, Kirin would take the lead over Asahi Breweries’ 37% market share. It would also capture Suntory’s health and soft drink businesses in Southeast Asia and in China, a spokesperson said.

Earlier this year Kirin, which held 37.5% of Japan’s beer market in January-June, agreed to a $2.5 billion buy-out of Australian brewer Lion Nathan, bringing the total that the maker of Kirin Lager Beer has spent on acquisitions to $10.5 billion (968.5 billion yen) over the past three years.

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

Suntory’s portfolio includes Malt’s beer, Dakara sports drinks, vitamins, and a whiskey.

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