Suntory Beverage & Food Ltd. (2587) agreed to buy the Lucozade and Ribena drink brands from GlaxoSmithKline Plc (GSK) for 1.35 billion pounds ($2.1 billion) as the Japanese company reduces reliance on its domestic market.
The transaction is expected to be completed by the end of the year and the proceeds will be used partly to reduce debt, Glaxo said in a statement today on the London Stock Exchange.
Suntory Beverage is preparing to spend as much as 500 billion yen ($5 billion) on takeovers after holding Japan’s largest initial public offering this year. Glaxo, the U.K.’s biggest drugmaker, is selling the brands as part of a revamp announced in April to separate older products from its bigger business of developing new medicines.
“Since it’s already a known brand, they’re not going to have a problem putting it on the shelf,” said Mikihiko Yamato, deputy head of research in Tokyo at JI Asia, referring to Lucozade. “Suntory may want to start a new category within the energy drinks market,” said Yamato, who doesn’t cover the company.
Lucozade, an energy drink that competes with PepsiCo Inc.’s Gatorade and Coca-Cola Co.’s Powerade, and Ribena, a liquid concentrate marketed toward children, had combined sales of about 500 million pounds last year, Glaxo said. Suntory will acquire global rights to the brands and Glaxo’s Coleford manufacturing site.
The acquisition is the largest announced by a Japanese consumer company this year, according to data compiled by Bloomberg. Suntory Beverage closed 0.4 percent higher at 3,515 yen in Tokyo trading today. GlaxoSmithKline fell 0.7 percent to close at 1,640 pence in London.
Glaxo said in April it was forming a new unit to house more than 50 older products with combined annual sales of about 3 billion pounds, prompting speculation it may sell the brands.
Suntory Beverage has said it plans to acquire companies in Southeast Asia, Middle East, Africa and Latin America to help double sales to 2 trillion yen by 2020. The Tokyo-based company derived about 31 percent of revenue from overseas markets last year, compared with 25 percent in 2011, according to data compiled by Bloomberg.
The acquisition would allow the Japanese company to expand in countries where the U.K. company already operates, such as Nigeria and Malaysia, Suntory said.
Suntory aims for 5 percent annual sales growth in the brands which the company expects would provide “stable profits,” Chief Executive Officer Nobuhiro Torii said at a media briefing in Tokyo today.
Suntory was advised by Morgan Stanley and Glaxo worked with JPMorgan Chase & Co. and Greenhill & Co.
The drinks maker began trading July 3 after raising almost $4 billion in the nation’s biggest share sale since Japan Airlines Co.’s 663 billion yen initial public offering in September last year.
Parent Suntory Holdings, which sells whiskey and beer, remains unlisted. The beverage group bought France’s Orangina Schweppes Group for 300 billion yen in 2009 and paid 600 million euros in the same year for New Zealand’s Frucor Beverages Group.
Suntory Holdings had a 20 percent share of Japan’s non-alcoholic drink market in 2012, the second-biggest after Coca-Cola Co.’s 28 percent, according to Inryosoken, a research company.
Suntory Beverage almost doubled first-half net income to 12 billion yen after it pared costs and sales in Asia rose, the company said Aug. 6.
Suntory is known for its slogan “Yatteminahare,” or “Go for it,” created by founder Shinjiro Torii. Actor Bill Murray’s character in the 2003 film “Lost in Translation” introduced the company to international filmgoers with the line, “For relaxing times, make it Suntory time.”