MSG Maker Ajinomoto May Spend $3.7 Billion on Acquisitions in Three Years

Ajinomoto Co., the Japanese seasonings maker that first sold monosodium glutamate, may spend 300 billion yen ($3.7 billion) on acquisitions in the next three years as the company expands overseas.

“We want to beef up our strong areas like Brazil and Southeast Asian countries as well as expand in new markets such as the Middle East and Africa,” President Masatoshi Ito, 63, said in an interview at the company’s Tokyo headquarters yesterday. In July, a team directly reporting to Ito will be set up to study potential purchases and alliances, he said.

The seasonings maker may target overseas foodmakers and companies doing biotechnology research as it aims to boost operating profit by 26 percent in three years as Japan’s shrinking population dampens demand. The company, which earned about 60 percent of its operating income overseas last year, may borrow to partly fund its expansion, Ito said.

“Ajinomoto has been rather sleepy in recent years but may now be waking up,” said Edwin Merner, Tokyo-based president of Atlantis Investment, which manages about $3 billion in assets. “They should consider buying smaller companies in developing countries in Asia, Africa and South America, and then invest and build them up.”

Photographer: Haruyoshi Yamaguchi/Bloomberg

Ajinomoto Co. President Masatoshi Ito in Tokyo. Close

Ajinomoto Co. President Masatoshi Ito in Tokyo.

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Photographer: Haruyoshi Yamaguchi/Bloomberg

Ajinomoto Co. President Masatoshi Ito in Tokyo.

‘Being Picky’

Ajinomoto, which means “the essence of taste,” fell 0.8 percent to 917 yen at the 3 p.m. close on the Tokyo Stock Exchange. The stock has climbed 8.4 percent this year after declining annually in the four years through 2010.

“We’re allowing ourselves the luxury of being picky about which company to buy,” Ito said. “It’s not easy because we are looking for companies that have high odds of being successful.”

The company made its last acquisitions in 2007. It bought the 75 percent it didn’t already own in Calpis Co., a Japanese maker of dairy-based beverages, for 82.5 billion yen. Ajinomoto also acquired New Season Foods Inc., an Oregon-based supplier of ingredients for instant soup, and 33 percent of Yamaki Co., a Japanese maker of soup stocks.

Ajinomoto had cash and near cash items of 98 billion yen as of March 2010, according to data compiled by Bloomberg.

“Among the measures we need to take in order to grow are acquisitions and alliances,” Ito said. “Our priorities are Southeast Asia and South America and surrounding areas.”

Cutting Costs

Ajinomoto’s biggest overseas market is Asia excluding Japan, as the region contributed 15 percent of its revenue and 36 percent of the operating profit in the last fiscal year.

Operating profit, or sales minus the cost of goods sold and administrative expenses, will rise to 87 billion yen in the 12 months ending March 2014 from an estimated 69 billion yen this year, Ajinomoto forecast last month. Sales may rise to 1.37 trillion yen in the year ending March 2014 from an estimated 1.21 trillion yen this fiscal year, it said.

Operating profit may increase at least 4 percent next fiscal year, Ito said. Fermentation and other raw materials costs may rise by 10 billion yen, he said.

The company, which began selling the food flavoring known as MSG more than a century ago, expects to cut costs by 7 billion yen over the next three years by introducing a new production system that uses fewer raw materials, Ito said.

Ajinomoto also makes amino acids used in animal feed.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net

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