Everything in Japan is contracting: car sales and production, TV sets. The only thing growing is government debt.
Beer and liquor sales are no different, and have been that way now for years.
An aging population, especially among the normal male drinking market, has seen beer consumption stall and now fall.
Hence the move by the country’s big beverage groups to look offshore for sales and earnings growth.
Leading the way has been Kirin Holdings which has expanded into Asia and Australia.
San Miguel in the Philippines was a major play and San Miguel then moved into Australia, buying control of Cascade Brewery and the Berri juice company.
It then bought National Foods, the big dairy company.
Two years ago it unwound some of these deals, with Kirin buying National Foods and Berri and Cascade being bought by Lion Nathan, which was Kirin’s major Australian investment, having built the stake from 1998 to a controlling 46%.
It built on this empire with last year’s takeover of Australia’s Dairy Farmers for $675 million.
Several months ago Lion Nathan made an unsolicited attempt to take over Coca Cola Amatil of $7.3 billion, a move that was eventually rejected by its major shareholder, The Coca Cola Company of the US, as well as being strongly opposed by local management of CCL.
The deal would have created an $11 billion beverages giant, and in the obvious briefings from Lion (Kirin), the argument in favour of the deal was the search for growth outside of Japan by Kirin.
Now Lion Nathan Ltd has been approached by its biggest shareholder, Japanese beer maker Kirin Holdings Co, to buy the remaining stock in the company.
The outstanding shares might cost Kirin around $2.5 billion. Lion has around $4.1 billion in annual sales.
The cost is unknown, but will have to value Lion at above $5 billion in total to be successful (Including Kirin’s stake).
Lion Nathan shares closed at $8.31 on Wednesday, which valued it at $4.40 billion. Some market reports claim the price will end up around $11 a share.
Lion Nathan yesterday requested a trading halt for its shares while it holds confidential discussions with Kirin.
In the statement to the ASX, Lion said Kirin’s approached it after the close of trade on Wednesday with an indicative, non-binding, conditional and confidential proposal to buy the shares it didn’t own.
Lion said it would establish an independent board committee to clarify the details of the Kirin offer on behalf of the remaining shareholders.
The trading halt will remain in place until an announcement is made, or Monday April 27.
After the failed merger idea with CCL, analysts suggested that taking control of Lion Nathan would the most sensible expansion path for Kirin in Australia.
Kirin, like other groups, such as Asahi and Suntory are facing a contracting domestic market.
A declining birthrate reduces potential customers at home, as does the changing demographic structure of the target age groups remaining: fewer males and more females, who are not interested in beer.
A stronger yen makes foreign acquisitions less expensive.
It’s why Suntory recently paid around $A1 million for Danone’s Australian and NZ dairy arm, Frucor. It owns the V-brand energy drink. Suntory paid around 3-4 times sales.
