Japanese brewer Suntory said today it was considering options including a merger with larger rival Kirin, which would create one of the world's largest beverage and food firms.
Kirin and unlisted Suntory are in talks to merge under a holding company, seeking to strengthen their operations in a mature Japanese market and accelerate expansion into growing overseas markets, the Nikkei business daily said.
The news sent shares of Kirin soaring 8.2 percent to a nine-month high. “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."
The two aim to agree on the deal this year, the Nikkei said citing unidentified sources. Suntory spokeswoman Naoko Tsuda said the company is considering various options, but that nothing had been decided.
When asked if a merger with Kirin was one of the options under consideration, she said, "Yes."
Kirin spokesman Mitsutake Matano declined comment on the possibility of a merger, repeating a statement that while Kirin is working with Suntory on procurement, distribution and other business activities, nothing had been decided.
The merged firm would be the largest player in the Japanese beer and soft drink markets, and one of the biggest globally, with combined annual sales of 3.8 trillion yen ($41 billion).
That would put it on par in revenue terms with US-based Kraft Foods and Pepsico.
Japan's beer market has shrunk by 15 percent in terms of shipment volumes over the past decade, forcing the industry to slash costs and look overseas for growth.
"A merger could very likely help resolve overcompetition in the beverage industry," wrote Goldman Sachs analyst Katsunori Tanaka in a note to investors, adding that would help speed up consolidation in the sector.
Earlier this year Kirin, which held 37.5 per cent of Japan's beer market in January-June, agreed to a $2.5 billion buy-out of Australian brewer Lion Nathan, the latest in a series of deals by the maker of Kirin Lager Beer.
Last year Suntory outmanoeuvred both Kirin and Asahi Breweries Ltd with a more than €600 million deal for Danone's Frucor juice unit and said it was ready spend another $2 billion or so on acquisitions.
The Nikkei said Kirin Holdings President Kazuyasu Kato and Suntory Holdings President Nobutada Saji met at the end of last year to initiate talks and they had informed some of their executives of the merger plan by early July.
Reuters