* Biggest deal yet in a slew of acquisitions by Asahi
* Calpis buy makes Asahi Japan's No.3 soft drinks firm
* Asahi to fund deal with cash, borrowing
TOKYO, May 8 Japanese brewer Asahi is
to buy soft drinks group Calpis for about 120 billion yen ($1.5
billion), the largest of a string of deals by the company to
offset a declining domestic beer market with new sources of
Calpis, known for its milky drinks popular with Japanese
children, will make Asahi Japan's No.3 non-alcoholic beverage
maker. The deal highlights the pressures in the country's
crowded beverage sector where players are fighting for pieces of
a shrinking market.
Asahi and other Japanese brewers such as Kirin Holdings
have been on an acquisition spree overseas to combat
Japan's declining population, uncertain economic prospects and
The brewer's plan to purchase Calpis from seasonings maker
Ajinomoto Co follows $3.7 billion in deals done over
the past five years.
The maker of Japan's top-selling "Super Dry" beer has taken
stakes in China's Tsingtao Brewery, bought the Australia
business of Schweppes and last year spent nearly $1.2 billion
for New Zealand beverage group Independent Liquor, its largest
deal at that time.
"Calpis is a top dairy product with a bright image as a safe
and healthy product and strong brand recognition. We do not have
dairy products, so it will be a good compliment to our product
portfolio," Asahi president Naoki Izumiya said at a briefing on
"If you have a brand that is number one, or a strong number
two, in its category, the strength of that portfolio will allow
for growth, even in a tough market."
The acquisition - first flagged to the market after reports
last month by Reuters and other media - comes at a high price,
"On the surface, the (deal) price is negative (for Asahi),
since the valuation seems comparatively high from the point of
how successful the synergy will be when you taken into account
previous results," said Hiroshi Saji, a senior analyst at Mizuho
Asahi will fund the purchase of Calpis with cash and by
borrowing. It aims to complete the deal by October when it will
decide on the final price and the specifics of the deal.
Asahi has long been looking to bolster its domestic soft
drinks business, which it expects to account for 22 percent of
its forecast for nearly 1.6 trillion yen in sales for the year
to December, significantly less than the 62 percent it is
looking for from alcoholic beverage sales at home.
With the purchase of Calpis, Asahi will move ahead of rival
brewer Kirin Group Holdings and tea maker Ito En
in Japan's soft drinks market, but will still lag
bottler Coca-Cola Enterprises and unlisted Suntory
Ajinomoto intends to use the proceeds from the sale for
future alliances as well as mergers and acquisitions with
seasonings, food and biotech firms, president Masatoshi Ito
Ajinomoto also said it would buy back up to 7.39 percent of
its outstanding shares, worth 50 billion yen.
Prior to the announcement on Tuesday, shares of Asahi ended
0.3 percent higher, against a 0.7 percent gain in the Nikkei
In the year to date, Asahi shares have risen 4.3 percent,
underperforming an 8.6 percent gain in the Nikkei 225 average
. But shares in the beer maker have fallen 3.2 percent
since reports of the deal surfaced on April 27, slightly less
than a 4.0 percent fall in the benchmark over the same period.
Merrill Lynch advised Asahi on the latest deal,
while JP Morgan acted for Ajinomoto.