Money Matters, Simplified.
Kirin and Suntory in merger talks
by Neka Sehgal - July 13, 2009 - comments
Japanese brewer Suntory Holdings is considering merging with rival Kirin Holdings, a move that would create one of the world’s largest beverage and food companies
Tokyo, July 13: The leading Japanese beverage giants Kirin Holdings and Suntory Holdings are considering combining their operations, a merger that would create one of the world’s largest beverage makers, local media reported Monday.
Kirin President Kazuyasu Kato and Suntory President Nobutada Saji initiated talks at the end of last year and by early July they had informed their executives of the merger plan.
Citing unnamed sources, Nikkei business newspaper stated that their strategy focuses on integrating the holding companies into one, then placing core operations under this entity. The details about reorganization of businesses into categories, such as liquor and soft drinks will be ironed out later.
"If a merger is realised, that would give them the market share to take leadership in pricing and help their soft drinks businesses -- a chronic weak spot in a ultra-competitive market," said JP Morgan analyst Naomi Takagi.
"It's a huge positive if they can do it.
One of the largest beverage company
The merger would create an entity that would become Japan's top firm in both the beer and soft drink markets and one of the world's largest beverage companies with total revenues of around 3.82 trillion yen.
Both companies produce alcoholic and non-alcoholic beverages and the holding company would create the world's fifth largest food company overtaking Coca Cola Co. and just behind Kraft Foods Inc. and Pepsico Inc., Nikkei reported.
Benefits of merger
Analysts said the merger would benefit the domestic market, where the two hold a combined 50 percent market share for beer products.
Though their home market is deteriorating, Japan's beer makers have resisted the consolidation trend until now because buying a company within the same industry often requires layoffs and closures.
However the move would help the companies to enhance earning in Japan by addressing the shrinking domestic market, and diversify overseas by competing with large international brands.
Kirin’s statement
Kirin said in a statement that while the two companies had cooperated on certain aspects of their businesses, it said nothing concrete had been decided on a tie-up.
"We have cooperated with Suntory in distribution, procurement and many other fields but nothing concrete has been decided regarding such a business merger as reported," the company said in a statement
In trading on the Tokyo Stock Exchange, Kirin's share price jumped on the possibility of the merger, and was up 8.5 per cent at Y1401 at 0128 GMT.