Kirin to Consider ‘Small-Scale’ Acquisitions in Southeast Asia
The company will “consider corporate tie-ups and small- scale mergers and acquisitions in Southeast Asia” with partner Fraser & Neave Ltd. (FNN) and focus on lowering its debt, Chief Executive Officer Senji Miyake said in an interview in Tokyo yesterday. “The time for big M&A is over for now and our number one priority is to pay off our debts.”
The Tokyo-based beverage maker plans to expand in Vietnam, Thailand and Indonesia, Miyake said, pitting it against Asahi Group Holdings Ltd. (2502), which also seeks to grow in the region. Kirin has invested more than $4 billion abroad in 2011, continuing its overseas push as beer demand declined at home for a 14th straight year in 2010.
“The Southeast Asian market is not yet dominated by one company so there are opportunities,” said Mikihiko Yamato, an analyst at JI Asia, who recommends buying Kirin shares.
Kirin has made at least four acquisitions this year, including Brazilian beermaker Schincariol Participacoes e Representacoes, and invested $400 million for a 40 percent stake in a soft-drink venture with state-backed China Resources Enterprise Ltd.
Kirin fell 1.1 percent to 932 yen at the 3 p.m. close of trading in Tokyo. The stock has declined 18 percent this year.
The brewer of maker Kirin Lager seeks to distribute its brands in Southeast Asia next year through Fraser & Neave, Miyake said. Kirin is the biggest shareholder of Fraser & Neave, with a holding of about 15 percent, according to data compiled by Bloomberg.
The yen has risen more than 7 percent against the dollar in the past year, the biggest gainer among 10 major currencies tracked by Bloomberg.
Asahi, Japan’s biggest beermaker by volume, plans takeovers across Southeast Asia to access wider margins and it “already” knows the targets, President Naoki Izumiya said in an interview on Dec. 12.
Kirin made 23.4 percent of sales abroad last year, compared with 6.6 percent for Asahi, according to company statements.
Kirin last month agreed to buy out shareholders in Schincariol Participacoes e Representacoes, completing its biggest acquisition. The deal valued the Brazilian company at about $3.6 billion excluding debt, when combined with the initial purchase in October of a 50.45 percent stake.
The brewer last month also agreed to assume 1.1 billion reais ($593 million) of Schincariol’s debt and estimated 2.1 billion reais of potential labor, legal and tax liabilities as part of the deal.
Kirin plans to lower its debt, Miyake said, without elaborating what steps it will take. The company’s debt-to- equity ratio jumped to 1.1 times after the purchase of Schincariol, he said.
The brewer increased its stake in Manila-based San Miguel Brewery Inc. (SMB) to 48 percent in 2009, bought a 14.7 percent of Singapore’s Fraser and Neave Ltd. last year and purchased a majority stake in Vietnam’s Interfood Shareholding Co. for an undisclosed sum in March.