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Asahi plans $9.2 billion warchest for M&A
August 3, 2010 / 1:01 PM / 7 years ago

Asahi plans $9.2 billion warchest for M&A

TOKYO (Reuters) - The head of Japan’s Asahi Breweries said he expects to have $9.2 billion on tap for acquisitions over the next five years as it looks for new growth drivers outside the shrinking domestic beer market.

Asahi President Naoki Izumiya also told Reuters that he wanted to lift its stake in China’s Tsingtao Brewery pending regulatory changes, and is eyeing closer ties in South Korea with that country’s top soft drinks maker, the Lotte Group.

“We are eyeing the Asia and Oceania regions, with our top priorities being the alcohol business overseas and the soft drink business in Japan,” he said in an interview at the headquarters of the maker of “Super Dry,” Japan’s best-selling beer.

Asahi’s chief Japanese rival Kirin Holdings has been more aggressive in making acquisitions overseas to diversify away from the home beer market, which has shrunk by more than 15 percent in volume terms over the past decade.

Izumiya said the company should be able to secure 400 billion yen for acquisitions over three years through cash flow, asset sales and debts. “If we extend the period to 2015, we will be able to have 800 billion yen,” he said.

Buying other companies is a crucial component of Asahi’s plan to boost group revenues to 2 to 2.5 trillion yen in 2015, up from around 1.5 trillion yen now. It wants to generate 20-30 percent of its sales overseas, up from an estimated 7 percent this year.

He said Asahi needs to beef up through alliances to cope with ongoing industry consolidation.

“In order for us to survive on the global stage, it’s important to have partnerships with top 20 companies,” he said, without naming potential partners.

Asahi ranks as the world’s 12th largest beer maker with a market share of 1.6 percent in terms of volumes in 2009, according to Euromonitor data. The top brewer is Anheuser-Busch InBev with 19 percent of the market.

SOUTH KOREA, CHINA

Asahi said earlier on Tuesday that it was considering selling its 58 percent stake in loss-making South Korean soft drinks unit Haitai Beverage, as part of a revamp of its operations in the country.

Izumiya said Asahi was considering expanding ties with Lotte in South Korea, possibly through the creation of a joint venture for soft drinks. The two already run a venture to sell Super Dry in the local market.

“The South Korean (soft drinks) market is about one-tenth of Japan’s but it is growing, and Lotte is the No. 1 local company,” he said. “Strategically it’s the right move to team up with the No. 1 or 2 players in local markets when expanding overseas.”

Izumiya said he also wants closer ties with Tsingtao Brewery, in which Asahi acquired a 19.9 percent stake last year. That could include taking a bigger stake, a move that is currently impossible due to regulatory restrictions.

“Things are changing in China. When the rules of the game change, we have to be ready to act,” he said.

Investors and analysts have speculated that Asahi could also take a look at Foster’s Group, which is in the spotlight as a potential takeover target after its decision to split off its struggling wine business.

“It is still a rumor that Foster’s might be up for sale after splitting off its wine business. So, it’s not yet at a stage where we can talk about what we might want to do,” Izumiya said.

Reporting by Taiga Uranaka and Ritsuko Shimizu, additional reporting by Miyoung Kim in Seoul; Editing by Chris Gallagher and Nathan Layne

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