Australia now has a new food giant in the country as the ownership of National Foods and a small brewery is reshuffled in deals worth more than $3.1 billion.
Philippines-based San Miguel Corp is exiting Australia as it sells off its dairy products and beer operations to its major shareholder, the Kirin Brewery group of Japan, which will now dominate the local food industry.
San Miguel said yesterday it was selling National Foods and Tasmanian brewer J Boag & Son in linked deals.
National Foods is being sold to Japanese beer maker Kirin for $2.8 billion, including debt, after San Miguel acquired it in 2004 for $1.8 billion.
Kirin owns 20% of San Miguel and 46% of Lion Nathan which is buying Boag from San Miguel for $325 million.
Lion Nathan, which is due to make a profit statement in just under two weeks, also controls a major brewing business in New Zealand, as well as wine in both countries.
The market didn't like the deal, selling down LNN shares 31c to $8.99. They hit a low on the day of $8.81.
The deals mean Kirin's involvement in the Australian food industry will be more direct and deeper, rather indirect as it was through the stake in through San Miguel.
Its reach will extend from the farm to supermarket shelves full of yoghurt, milk, cheese and juice, to beer and wine on both sides of the Tasman.
Kirin said in a statement that it will complete the acquisition of National Foods by the end of the year. It said the deal will boost its presence in Asia and Oceania.
"Through the acquisition of all shares in National Foods from San Miguel, Kirin will obtain a new growth opportunity in the Australian dairy products, beverages and specialty cheese business," it said.
"By adding National Foods' strong brands to its product portfolio, Kirin is laying the strong business foundations in the field of `food and health' business in Asia and Oceania."
Kirin also said it will discuss with Lion Nathan possible synergies that could be generated by the transaction.
National Foods' key brands are Pura Milk, Yoplait yoghurt, Berri fruit juices and Lactos cheese.
It also has operations in New Zealand, Malaysia and Indonesia.
"National Foods will continue to pursue business expansion opportunities in Asia and Oceania," Kirin said.
National Foods had a 10% rise in first half sales and the Kirin moves follows a major move in Japan with the purchase of a pharmaceutical company (there is some technology overlap).
Kirin's earnings from its Japanese beer business have been declining, (the country is ageing and wine consumption is growing) so the drugs and food represent a more direct way to get growth rather than the stake in San Miguel.
The question is whether it will now maintain that holding in San Miguel, which dominates the Philippines food industry.
Kirin is buying at the top of the market: the high Australian dollar and low yen makes it a costly purchase and the local food industry is struggling because of the impact of the drought.
Lion Nathan revealed the Boag & Son buy yesterday in a statement to the ASX.
San Miguel acquired the business for $92 million in 2000, so it has made a nice profit selling to its indirect associate.
Lion Nathan has been looking to expand in beer. Several years ago it was frustrated when it tried to buy the Copper's Brewery business in Adelaide.
Lion Nathan chief executive Rob Murray says Lion plans to grow the business and key brands, Boag's Draught and James Boag's Premium.
"As owner of the J Boag & Son brands and the distribution channel, we intend to leverage our sales coverage and focus, and our distribution reach to make these great beers available to more Australians."
Lion said the Tasmanian brewer had sales revenue of $92 million in 2005-06, from about 45 million litres of beer and generated earnings before interest and tax depreciation and amortisation of about $17.9 million.
Lion Nathan said the acquisition is expected to be completed in January next year
Lon Nathan also said it expected to incur one-off costs from the acquisition linked to factors such as business integration, but had not determined yet what they might be.
"Therefore, the total impact on Lion Nathan's fiscal 2008 EPS is uncertain at this early stage, but a further update will be provided when one-off costs are able to be more accurately quantified."
"The acquisition is expected to be EPS accretive from fiscal 2009, the first full year of ownership."
The acquisition is subject to regulatory approvals being granted and the Kirin's purchase of National Food's being completed.
