Sept. 11 (Bloomberg) -- Suntory Holdings Ltd. is in talks to buy European drinkmaker Orangina, which may be sold for 750 million euros ($1.1 billion) more than owners Blackstone Group LP and Lion Capital LLP. paid three years ago.

An agreement to buy Orangina may be announced today for 2.6 billion euros, the Financial Times said, without citing anyone. Suntory’s Japanese brewing rival Asahi Breweries Ltd. denied the FT report that it was considering a separate bid. Suntory and Blackstone today declined to comment after yesterday saying they were in talks.

Buying the European drinks business previously owned by Cadbury Schweppes Plc would give Suntory the Orangina, Oasis, Schweppes and other brands that have sales of about 1 billion euros 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.

“The Japanese market is shrinking and beverage makers need to tap overseas markets for growth so the move make sense,” Tomonobu Tsunoyama, an analyst at Tokai Tokyo Research Center Co., said by telephone today. “The European drinks market is so far dominated by local players.”

Beer shipments by Japanese brewers fell 6 percent to 42.7 million cases last month, the lowest shipment level for August since records began in 1992.

Yen Gains

The Japanese currency has gained 17 percent against the dollar in the past year.

Asahi rose 0.2 percent to close at 1,606 yen in Tokyo trading today and has risen 4.4 percent this year. Kirin dropped 1.2 percent to 1,352 yen, trimming its gain this year to 15 percent.

Kirin was Japan’s biggest brewer by volume in the first half, followed by Asahi with Suntory ranked third.

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 followed by PepsiCo Inc., with Suntory ranked sixth, Kirin eighth and Orangina 15th.

Orangina is an orange-flavored carbonated soft drink containing fruit pulp. 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 in 2001, and the drinkmaker was consequently acquired by Blackstone and Lion Capital for 1.85 billion euros in 2006.

Bank of America Corp.’s Merrill Lynch & Co. is advising Suntory, the FT reported. Merrill Lynch’s spokesman Takayuki Inoue declined to comment today.

Suntory’s Europe Sales

Naoko Tsuda, Tokyo-based spokeswoman at Suntory, and Peter Rose, spokesman for New York-based Blackstone, declined to comment today on the FT report.

Tokyo-based Asahi isn’t considering a bid for Orangina, spokesman Tetsuya Kusada said by telephone today, denying the newspaper report.

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.

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

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

Last Updated: September 11, 2009 05:12 EDT