Kirin Bids For Remaining Stake In Lion Nathan

Post by Sharat on April 24, 2009 · Under Australian Economy, Business News, Company News, Equities, Mergers & Acquistions · Comment

Japanese brewing major, Kirin has signalled its intention to be a major player in the Australian beverage industry, after announcing a bid for the second largest brewing group in Australia Lion Nathan.

Kirin wishes to purchase the outstanding 53.9 per cent take it does not already own and turn the company into a captive subsidiary. Kirin already owns milk company Dairy Farmers and National Foods which markets the largest selling juice brand in Australia.

Lion Nathan’s stock market valuation as of Thursday’s closing price of A$8.31 stood at A$4.4 billion. The value of the stake that Kirin does not already own is valued at A$2.4 billion.

Kirin will have to offer a premium if it wants complete control of Lion Nathan, with analysts suggesting a price of between A$11 to A$12 a share. At A$11 per share Kirin would need to come up with A$ 3 billion in cash to be able to complete the takeover.

In a client note, Citigroup said that Kirin could pay up to A$12.50 a share.

“Kirin’s sizeable war chest, its low cost of capital, yen strength and lack of competing bidders suggests the likelihood for a successful deal is high,” the research note said.

Japanese consumer goods companies are keen to expand the markets they operate, in the face of a domestic market which is aging and in the future unless there is large scale immigration, will shrink and inevitably become smaller.

Australia in particular has proven to be a popular destination for Japanese companies on the hunt for acquisitions, though Japanese companies have found their targets all over the world. Last year Asahi Breweries agreed to purchase the soft drinks operations of UK confectionary group Cadbury’s, whilst Suntory another Japanese food and beverage company purchased Frucor, an energy drinks business owned by France’s Danone.

Earlier this year Kirin had backed Lion Nathan’s unsuccessful A$7.7bn pursuit of Australian-listed Coca-Cola Amatil (CCA). Kirin had been looking to buy shares in Lion Nathan at A$11.50 apiece to help finance the proposed deal. The deal fell through after major shareholder Coca-Cola declined to agree to doing a deal.

Lion Nathan’s shares, quoted in Australia and New Zealand, were placed in a trading halt yesterday morning. The trading halt will last until either an announcement is made in relation to the offer or the beginning of trading on Monday morning.

Lion Nathan said the proposal from Kirin was preliminary and incomplete, adding a committee of directors independent of the Japanese group would examine the offer. Kirin earlier this year acquired a large stake in San Miguel Brewery, the Philippines’ largest beer company.

The Japanese beverage company has a strategy of wanting to double its overseas revenue by 2015. Currently overseas sales make up 15 per cent of its total revenue. Kirin has a goal of increasing overseas revenue to 30 per cent of total revenue.

The strategy is a defensive one aimed at insuring itself against a domestic market where consumption is falling as a result of ageing and declining population. The brewer also wants to take advantage of a strong domestic currency, which makes deals from its perspective look cheap.

Kirin is being advised by JP Morgan and Deutsche Bank, while Caliburn, an Australian boutique, is advising Lion Nathan.

Compare Australian Personal Loans