Suntory considers Kirin merger proposal

Posted by Daniel Palmer on 4th August 2009

Suntory, the owner of Frucor and one of Japan’s larger brewers, is still considering the option of a merger with Kirin Holdings – which would create a food and beverage firm of an equivalent size to PepsiCo.

Analysts believe such a merger will give them the ability to take price leadership in their stagnant home market, while also allowing them to speed up their overseas expansion plans – which have largely centred on Australia to date.

“If a merger is realized, 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,” JP Morgan analyst Naomi Takagi told Reuters. “It’s a huge positive if they can do it.”

The deal remains likely to be completed before the year, according to reports from Nikkei, but both parties stress no agreement has been reached, yet. Suntory spokeswoman Naoko Tsuda said the company was considering various options, including a merger.

The potential for the deal to go ahead has already put pressure on Asahi – another major player in the Japanese market – to make an acquisition of their own. As such, the rumour mill is again buzzing with talk that Foster’s would be a suitable target to follow-up on their recent purchase of Schweppes in Australia. If such a move was made, Asahi would be facing off against its major home competitor (Kirin) in Australia as well – with Kirin set to complete an acquisition of Lion Nathan, Australia’s second largest brewer, before the end of the year.

The falling yen and surge in Foster’s share price have recently made the brewer look a little more unattractive, however.