(Adds company comments, background)
TOKYO Jan 27 Snow Brand Milk Products 2262.T,
Japan's No.3 dairy products firm, plans to merge with Nippon Milk
Community Co, Japanese media reported, in the latest
consolidation in the country's struggling dairy sector.
Dairy products makers have embarked on a series of alliances
to cope with high raw materials prices and sluggish demand as the
number of children in Japan declines.
Industry leader Meiji Dairies Corp 2261.T has said it plans
to merge with top confectionery maker Meiji Seika Kaisha 2202.T
in April, while second-ranked Morinaga Milk Industry (2264.T) is
reportedly is in merger talks with another confectionery
producer, Morinaga & Co (2201.T). [ID:nT181384]
Snow Brand and Nippon Milk Community would have combined
annual sales of 506 billion yen ($5.7 billion), giving it a
similar scale to Morinaga Milk, which posted 587 billion yen in
revenue in the financial year that ended last March.
Spokespersons at both Snow Brand and Nippon Milk said they
had not heard of any merger talks, which were reported by the
Nikkei business daily and other Japanese media.
Shares of Snow Brand rose 2 percent to 305 yen by the midday
break in Tokyo. Meiji Dairies gained 2.6 percent, Meiji Seika
rose 2.2 percent, Morinaga Milk jumped 4.9 percent and Morinaga &
Co put on 3.1 percent.
Snow Brand span off its milk operations in 2003 and merged
them with agricultural cooperatives to create Nippon Milk as part
of its efforts to rebuild its business in the wake of food
scandals that damaged its earnings.
Snow Brand holds a 30 percent stake in Nippon Milk, which
sells products under the Megmilk brand.
Snow Brand has decided to merge with Nippon Milk now that it
has made significant progress in its own restructuring, while
Nippon Milk is suffering from rising fresh milk prices and would
benefit from greater economies of scale, the Nikkei said.
(Reporting by Sachi Izumi and Taiga Uranaka; Editing by Hugh