Sept. 10 (Bloomberg) -- Suntory Holdings Ltd. is in talks to buy European drinkmaker Orangina from Blackstone Group LP and Lion Capital Holdings Inc. as Japan’s third-largest brewer expands outside a shrinking domestic market.

The purchase, for more than $2.6 billion, could be agreed as soon as this week, said a person familiar with the talks who declined to be identified. Suntory is in discussions to buy Orangina, spokeswoman Aya Takemoto said today. Blackstone confirmed the talks in a Business Wire statement.

Buying the European drinks business previously owned by Cadbury Schweppes Plc would give Suntory the Oasis, Schweppes and other brands that have sales of about 1 billion euros ($1.46 billion) in the region. Suntory, which is also in talks to merge with Japan’s biggest brewer Kirin Holdings Co., is expanding abroad as the country’s beer sales fall and the yen gains.

“Purchasing Orangina would be a stepping stone to further development in global markets, including Europe,” Shigeo Kikuchi, an equity manager at Takagi Securities Co., said in a phone interview today. “Japan’s beverage industry is saturated and companies need to look for overseas markets to grow so the move is inevitable.”

Orangina is an orange-flavored carbonated soft drink containing fruit pulp popular in Europe. The brand was founded in 1936 by a Spanish chemist and was later bought by French liquor maker Pernod Ricard SA. Pernod sold Orangina to Cadbury Plc in 2001, and the drink maker was consequently acquired by Blackstone and Lion Capital LLP in 2005.

Japan Beer Sales

Beer shipments by Kirin, Asahi Breweries Ltd. and other Japanese brewers fell 6 percent to 42.7 million cases in August, companies and industry groups said in statements today. It was the lowest shipment level for August since records began in 1992.

Suntory’s Europe sales fell 29 percent to 9.2 billion yen ($100 million) in 2008, accounting for 0.6 percent of total revenue of 1.5 trillion yen. The closely held company, based in Osaka, western Japan, makes Malt’s and Super Magnum Dry beers as well as Suntory Yamazaki Single Malt Whisky, and distributes for Carlsberg A/S in Japan. It also makes food and is the Japanese partner of Haagen Dazs ice cream.

The Japanese currency has gained 17 percent against the dollar in the past year. It fell to 92.17 per dollar today after hitting 91.61 yesterday, the highest level since Feb. 17.

Takeovers

The global soft drinks market grew 11 percent to $416.3 billion last year, according to Euromonitor International. Coca- Cola Co. had the biggest market share with Suntory ranked sixth, Kirin eighth and Orangina 15th.

Blackstone and Lion Capital are in talks with Suntory and a deal could be reached this week, the Wall Street Journal reported earlier.

Suntory spokeswoman Aya Takemoto said by phone that the company is in talks as it’s considering an acquisition of Orangina, declining to comment further.

Cadbury Schweppes sold its European soft-drink unit to Blackstone and Lion for about 1.85 billion euros in 2006.

The business, renamed Orangina Schweppes in February, has more than 2,500 employees and 23 brands including sports drinks, mineral water and juice. Its products are sold mainly in Europe with some sales in Africa, Asia and the Middle East.

Companies worldwide have announced $45 billion of takeovers in the past 10 days, according to Bloomberg data. Walt Disney Co. agreed Aug. 31 to buy comic-book creator Marvel Entertainment Inc. for about $4 billion. The same day, Baker Hughes Inc. said it will buy BJ Services Co. for $5.5 billion in the largest oilfield-services company takeover since 1998. EBay Inc. agreed a day later to sell 65 percent of its Skype Internet-calling unit to a group led by firm Silver Lake for about $2 billion.

Suntory Earnings

Japanese beverage makers have announced or completed more than $6.5 billion worth of overseas acquisitions this year, according to data compiled by Bloomberg.

Suntory last year announced the takeover of Groupe Danone SA’s Frucor unit in Australia and New Zealand for more than 600 million euros.

First-half net income for Suntory fell 28 percent to 8.16 billion yen on higher raw material costs and the yen’s gains.

Suntory and Kirin may submit their merger plans to Japan’s Fair Trade Commission as early as next week, Nikkei English News said Sept. 8, without citing anyone. Both companies are seeking to bolster overseas profits, Kozo Chiji, an executive officer at Suntory, said earlier.

Kirin spokeswoman Marina Totsuka declined to comment on Suntory’s discussions to acquire Orangina.

Kirin rose 1.2 percent to 1,369 yen on the Tokyo Stock Exchange today, taking its gain this year to 18 percent.

Suntory was founded in 1899 and is controlled by President Nobutada Saji and the founding family. It had 21,845 employees as of last year.

“The whisky and beer business are having a difficult time and they will have a hard time getting back on the growth trail if ever,” said Edwin Merner, who helps manage about $3 billion at Atlantis Investment Research in Tokyo.

To contact the reporter on this story: Junko Hayashi in Tokyo at juhayashi@bloomberg.net

Last Updated: September 10, 2009 08:38 EDT