Suntory Holdings Ltd. is poised to raise as much as 476 billion yen ($4.7 billion) by listing shares of its non-alcoholic beverage business in what would be Japan’s largest initial public offering this year.
The company has set a tentative IPO price of 3,800 yen a share for the July 3 Tokyo listing, according to a filing yesterday with Japan’s Finance Ministry. The Suntory Beverage & Food unit may sell as many as 125.2 million shares including over allotment, according to Bloomberg calculations based on the filing.
The Osaka-based drinks maker as well as Japanese rivals such as Asahi Group Holdings Ltd. (2502) and Kirin Holdings Co. have sought growth through overseas deals as a declining population damps domestic demand. Suntory Holdings has been exploring ways to fund deals and has set up a department within the listing unit to explore mergers and acquisitions.
“Suntory has become a very strong competitor now that it’s listing and can raise more money for acquisitions,” said Mikihiko Yamato, deputy head of research for JI Asia in Tokyo. “Some investors may move funds from Kirin, Asahi to Suntory.”
The IPO would be the largest in the North Asian country since Japan Airlines Co.’s 663 billion yen offering in September, according to data compiled by Bloomberg. It will set a price range on June 17 with final pricing expected on June 24.
Kirin fell 5.1 percent to close at 1,634 yen in Tokyo trading today while Asahi lost 4 percent. The benchmark Topix Index dropped 3.8 percent.
A financial-market rally is fueling appetite for share sales in Japan. The Topix has climbed 57 percent over the past 12 months on the back of Prime Minister Shinzo Abe’s policies to stimulate the world’s third-largest economy.
Nomura, Japan’s biggest brokerage, said in January that it expects IPOs will climb to a six-year high. About 60 Japanese companies will announce debut share sales this year, a 25 percent increase from last year and the most since 121 in 2007, according to the Tokyo-based bank.
The IPO proceeds will be used for investments including acquisitions to strengthen operations in developed and emerging markets, according to the company’s prospectus.
About 350 billion yen of the proceeds will be used for Suntory Beverage, and the remaining of about 120 billion yen will be used for Suntory Holdings, which will stay unlisted, said Midori Takahashi, a spokeswoman for the company.
The closely held Japanese whiskey and beer maker is known for its motto ’Yatteminahare’ or “go for it,” the slogan created by its founder Shinjiro Torii. As Japan’s second-biggest drinks maker, it has focused overseas acquisitions on non-alcohol beverages over the past five years.
The company bought France-based Orangina Schweppes Group for 300 billion yen in 2009 and paid 600 million euros in 2009 for New Zealand’s Frucor Beverages Group Ltd.
Industry shipments of beer, low-malt beer, and beer-like drinks in Japan last year fell 1 percent to 438 million cases as demand fell for an eighth straight year.
Suntory Beverage, which accounted for about 60 percent of the parent’s operating profit in 2011, plans to double its sales to 2 trillion yen by 2020, it said in December. It had 992 billion yen of sales in 2012, an increase of 11 percent from a year earlier, while Suntory Holdings had 1.85 trillion yen, according to yesterday’s filing.
Suntory Holdings had 20 percent market share in Japan’s non-alcoholic drink market in 2012, the second biggest after Coca-Cola Co.’s 28 percent, according to researcher Inryosoken.
The IPO comes after merger talks between Suntory and Kirin Holdings Co. failed in 2010 due to differing opinions on the merger ratio.
Suntory Beverage plans to expand overseas through acquisitions in emerging markets such as Southeast Asia, Middle East, Africa and Latin America, it said in December in its mid-term plan from 2013 to 2015.
Net income at Suntory Holdings will increase 45 percent to 53 billion yen for the year ending Dec. 31, the company forecast in February. Revenue is projected to rise 9.1 percent to 2.02 trillion yen.
Nomura Holdings Inc. (8604), Morgan Stanley and JPMorgan Chase & Co. were selected to manage Suntory Beverage’s listing, the company said. Suntory Holdings will hold 59.5 percent of the listing unit, said Takahashi, a spokeswoman for the company.
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