Asahi buys NZ firm for $1.3 billion in pre-mixed drinks

TOKYO Thu Aug 18, 2011 3:33am EDT

A man reaches for a bottle of Japan's Asahi Breweries Super Dry beer at a liquor shop in Tokyo August 18, 2011. REUTERS/Toru Hanai

A man reaches for a bottle of Japan's Asahi Breweries Super Dry beer at a liquor shop in Tokyo August 18, 2011.

Credit: Reuters/Toru Hanai

TOKYO (Reuters) - Asahi Group Holdings (2502.T) is acquiring New Zealand beverage group Independent Liquor for $1.3 billion, giving the Japanese brewing giant a ready-to-drink cocktail maker to add to its stash of assets in the Oceania market.

Japanese brewers have been on an overseas spending spree, mainly in Asia and Oceania due to their proximity and growth prospects, as they look to make up for a contracting home market.

Overseas expansion is crucial to boost revenue growth as Asahi, the maker of Japan's top-selling "Super Dry" beer, struggles with a home beer market that shrank more than 15 percent in shipment volumes in the last decade.

In its biggest acquisition, Asahi said on Thursday it will buy all outstanding shares of Flavoured Beverages Group, the parent company of Independent Liquor known for its "Woodstock Bourbon" and "Vodka Cruiser" brands, from private equity firms Unitas and Pacific Equity Partners (PEP).

"With domestic demand weak, I have absolutely no disagreement with Asahi's strategy of seeking growth overseas," said Shigeo Sugawara, senior investment manager at Sompo Japan NipponKoa Asset Management.

"The real issue is whether or not Asahi will be able to speed up profit growth at the companies it has bought and how quickly it will see a return on its investment," he said.

Asahi aims to earn 6 percent of its sales from overseas markets this year, which is below a target of 30 percent set by rival Kirin Holdings (2503.T). Asahi's forecast doesn't include the recent slew of overseas deals.

Independent Liquor is New Zealand's top-ranked ready-to-drink cocktail maker and is No.3 in Australia. Last year, it had NZ$414 million ($348 mln) in revenue, but reported a loss of NZ$23 million.

Excluding its purchase of Independent Liquor, Asahi has spent nearly 225 billion yen ($2.9 billion) in the past five years, snapping up targets including taking a stake in China's Tsingtao Brewery and buying the Australia business of Schweppes.

Asahi's shares ended 1.7 percent higher after the announcement of the deal, which had been widely flagged by media reports in recent weeks, outperforming a 1.3 percent fall in the benchmark Nikkei average .N225.

Asahi has also announced plans to buy Permanis, the Malaysian bottler for beverage giant PepsiCo (PEP.N), for about $275 million and the mineral water and juice business of Australia's P&N Beverages for about $200 million.

To help build its position in the Oceania region, the firm, over a quarter owned by foreign investors, unveiled plans last month to buy out New Zealand fruit juices and soft drinks producer Charlie's Group CHA.NZ.

Asia has seen a spate of deals in recent months.

Diageo (DGE.L) has won Chinese approval to take control of Sichuan Swellfun (600779.SS), China's fourth-largest premium white spirits. On Thursday, Australian brewer Foster's FGL.AX rejected a $10 billion offer from rival SABMiller (SAB.L) for the second time as shareholders hold out for a better offer.

MORE ACQUISITIONS?

At a news briefing, Asahi President Naoki Izumiya told reporters his company would now focus on building its Southeast Asian network, but acknowledged the company needs to look further abroad.

"There is obviously a limit to expansion in Southeast Asia, and Asia as a whole, and if we only do it in Asia, it will not be enough to meet our goals," Izumiya said.

He was referring to Asahi's target to boost annual group revenue to 2-2.5 trillion yen by the end of 2015, up from around 1.5 trillion yen last year, with a goal of an overseas sales ratio of more than 20 percent.

"So our first consideration is seeing what more can be done in China, Asia and Oceania, but after that, we will of course need to make efforts to consider good offers available outside of those areas," Izumiya said.

With only a few targets available in the region, Japanese brewers have been shifting their focus outside of Asia.

This month, Kirin spent $2.6 billion to take a controlling stake in Brazilian beer and soft drinks maker Schincariol, in its first entry into the fast-growing South American economy.

In an interview last month, the overseas head at rival Sapporo Holdings (2501.T) said the beer maker was expanding its scope of its potential targets as it seeks to build up its North American operations.

Independent Liquor earns more than 90 percent of its sales from Australia and New Zealand, but is eyeing an expansion into the United States and China.

The purchase of Independent Liquor will be financed with cash on hand and through loans, President Izumiya said.

Nomura Holdings (8604.T) and Rothschild ROT.UL are advising Asahi, which aims to complete the Independent Liquor deal by September. UBS AG (UBSN.VX) is the financial adviser for PEP and Unitas.

Private equity firms Unitas and PEP acquired Independent Liquor in 2006 for more than $1 billion, and China's Bright Food Group has been among the list of possible buyers, sources had told said.

Unitas is a buyout group formerly known as CCMP. That group spun out of J.P. Morgan when the bank decided to hive off its private equity arm. PEP is a buyout fund focused on investments in Australia and New Zealand.

($1 = 1.190 New Zealand Dollars) ($1 = 76.565 Japanese Yen)

(Additional reporting by Mayumi Negishi, Emi Emoto and Yuka Obayashi; Editing by Nathan Layne and Anshuman Daga)

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