Monday, September 9, 2013
DJ: Suntory Beverage To Buy GlaxoSmithKline's Lucozade, Ribena For $2.1bn
TOKYO--Suntory Beverage & Food Ltd. (2587) has agreed to acquire GlaxoSmithKline PLC's (GSK.LN) drinks brands Lucozade and Ribena for 1.35 billion pounds ($2.1 billion) in a deal that will beef up its presence in Europe and help it tap into emerging markets in Africa and Southeast Asia.
Like many other Japanese beverage companies, Suntory, the bottler and distributor of PepsiCo Inc. (PEP) products in Japan, has made no secret of its ambitions to expand overseas as it combats a sluggish home market sapped by a shrinking population.
Glaxo, the U.K.'s largest drug maker by sales, had been looking to offload the two nutritional drinks brands as it tries to refocus its operations on its core health care brands. It announced earlier this year plans to sell off the brands.
Suntory's first deal since its $3.9 billion initial public offering in July also underscores the continuing appetite for outbound acquisitions by cash-rich corporate Japan.
Just last week, Otsuka Holdings Co. (4578) announced an $886 million deal to buy U.S. cancer drug maker Astex Pharmaceuticals Inc. (ASTX), while Japanese retail giant Aeon Co. (8267) is among the remaining bidders vying to buy Hong Kong supermarket chain ParknShop, people with knowledge of the deal said Friday.
Suntory President Nobuhiro Torii said in July the company was preparing to spend at least Y500 billion on acquisitions globally using a combination of proceeds from its recent IPO and bank loans.
Suntory will use cash at hand to buy the drinks brands in the latest deal. The purchase of the Glaxo brands will augment Suntory's reach in Europe, giving it better access to the U.K. market, after its $3.3 billion purchase of the privately held European soft drinks company Orangina Schweppes Group in 2009 gave it a major stronghold in the region. The deal will also give Suntory access to emerging markets such as Nigeria, South Africa, and Malaysia.
"This is a very rare opportunity that allows us to obtain strong brands" with a foothold in the U.K. as well as in emerging markets, Mr. Torii said Monday at a news conference in Tokyo, outlining the deal. "I think we were able to obtain an invaluable asset this time," he said, noting that the latest deal was not expensive when considering the potential synergies the deal will create in Europe and Asia.
Mr. Torii said the drinks brand business will likely generate a profit of GBP100 million in 2014 on the basis of earnings before interest, taxes, depreciation and amortization. For the year 2012, the two brands racked up combined sales of about GBP510 million.
In a statement, Glaxo said part of the net proceeds of around GBP 1.3 billion from the deal will be used to reduce its debt. In the second quarter of 2013 Lucozade sales grew 4% but Ribena was down 2%. The transaction is expected to be completed by the end of the year, it added.
"Lucozade and Ribena are iconic brands that have made a huge contribution to GSK over the years, but now is the right time to sell them as we increase the focus of our consumer health care business and execute the delivery of our late stage pipeline of pharmaceuticals and vaccines," Glaxo Chief Strategy Officer David Redfern said in a statement.
Like its rivals in the industry, Suntory has developed an appetite for outbound M&As in Southeast Asia, where the number of middle-income consumers is expected to jump with anticipated economic growth there. Still, Mr. Torii has expressed his interest in other regions, such as Africa and Latin America, while not ruling out acquiring brands in developed markets.
Suntory's overseas businesses also include soft drink maker Frucor Group, headquartered in New Zealand, and food and health supplements subsidiary Cerebos Pacific in Singapore. It also operates a soft drink joint venture in Indonesia with packaged beverage and food company Garudafood Group.
Among Suntory's main domestic rivals, Asahi Group Holdings Ltd. (2502) has been one of the most active in hooking up with companies overseas, with takeovers of a liquor company and four soft drink makers in Australia and New Zealand in 2011 and 2012.
On Monday, Suntory shares closed up 0.4% at Y3,515 in Tokyo trading compared with the Nikkei Stock Average's 2.5% rise as media reports of the deal came out. Glaxo shares at 0735 GMT were down 0.2% at 1648 pence, valuing the company at GBP80.88 billion.