January 27, 2009 / 3:04 AM / in 9 years

UPDATE 1-Two Japan dairy makers in merger talks-media

3 Min Read

(Adds company comments, background)

TOKYO, Jan 27 (Reuters) - 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 Lawson)

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