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Asahi Breweries Could Spend Up to $4.6 Billion on M&A

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Japan’s Asahi Breweries said it could spend up to 400 billion yen ($4.6 billion) on acquisitions to avoid getting left behind amid a rush towards consolidation in the global food and beverage industry.

Kirin Holdings, which runs neck-and-neck with Asahi for the top position in Japan’s beer market, is in talks to merge with Suntory Holdings to create a global food and beverage giant with sales on par with U.S.-based Kraft.

Suntory recently bought soft drinks maker Orangina Schweppes while Kraft is bidding for candy maker Cadbury Plc.

“To a certain degree we must attain scale or we will sink in a huge global swirl,” Asahi President Hitoshi Ogita told reporters after announcing a new business plan for the maker of “Super Dry” beer.

Ogita said the brewer could spend 300 to 400 billion yen ($3.4-$4.6 billion) on acquisitions, and that he saw good opportunities in Asia including Taiwan, Vietnam and Cambodia.

Japanese brewers have been scrambling to diversify their products and geographic reach to reduce their reliance on the domestic beer market, which has lost 15 percent in volume in the past decade as the economy sputters and the population shrinks.

Kirin has been the most aggressive acquirer, spending $1.5 billion in the past two years to buy Australia’s National Foods and Dairy Farmers and another $2.8 billion to take full ownership of the country’s No. 2 beer maker, Lion Nathan.

It also acquired a 49 percent stake in the Philippines’ San Miguel Brewery for $1.4 billion.

By comparison, Asahi has taken on smaller acquisitions, including a $667 million deal for a 19.9 percent stake in China’s Tsingtao Brewery and its purchase of Cadbury’s Australian beverage business for 550 million pounds.

In its business plan announced on Tuesday, Asahi said it aimed to boost revenue to 1.6 trillion yen in 2012, up from the 1.5 trillion yen it forecasts this year, and an 8 percent operating margin, compared with 5.8 percent this year.

It also said it would aim for revenue of 2-2.5 trillion yen in 2015, clearing the 2 trillion yen threshold Ogita said it needed to rank among the top 10 among global food and beverage firms.

The company expects the bulk of its growth to come from overseas markets, driven in large measure by acquisitions. It currently gets less than 10 percent of sales overseas and aims to boost that to 30 percent by 2015.

Ogita said Asahi would also pursue acquisitions in the non-alcohol beverage market in Japan.

“There will be a lot of consolidation moves in the industry, and we want to play the main role,” he said.

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Sunday, August 20, 8:53 pm

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