You could say Kirin breweries of Japan has been ‘dying’ to expand in Australia.

Its home market is aging, literally dying as Japan gets older: fewer young consumers are drinking beer or even spirits. The high yen means Kirin can convert is falling cashflows into cheaper Australian and New Zealand dollars (as can other Japanese grog groups such as Suntory and Asahi) and pick up assets and growth on the cheap.

Australian and New Zealand juice, milk and now beer assets are undervalued by local investors who ascribe no strategic value to them, except when someone like Kirin comes calling.

So now the Japanese takeover of the Australasian beverages industry is all but complete with Kirin the dominant player after winning approval from independent Lion Nathan directors for a mop up bid.

The way Australian investors have eagerly sold Australian food and beverage assets to the Japanese makes a mockery of the debate about the inroads Chinese companies want to make into Australia and Chinese influence.

In terms of the Australian economy and media Kirin is now one of the biggest spenders on marketing and will control the fortunes of the Australian newspaper, magazine and TV and radio businesses. It will be a sponsor of cricket or rugby league and a host of other events. The argument over Chinalco investing in Rio Tinto (run by a London-based collection of incompetents) pales behind the importance now Kirin has now assumed in everyday Australian life.

The Japanese will control a good part of the milk, fruit juice, beer and spirits we drink every day and the marketing of them.

Control of Lion will mean Kirin has its foot on the major milk producer in National Foods, plus the major player in NSW, Dairy Farmers (nice one by Graeme Samuel’s ACCC). It also has the major juice operator in Berri and now the country’s second biggest beer group.

Rival Suntory bought the Australian and New Zealand operations (Red Bull, juices) of the Frucor division of France’s Danone last month for around $1 billion. Kirin was an underbidder there, as were other Japanese and Australian groups.

Suntory beat Kirin (through its subsidiary National Foods) and Asahi Breweries of Japan, as well as soft drink heavyweights Coca Cola Amati for Frucor.

Late last year Kirin used Lion Nathan as the vehicle in an attempted takeover offer for Coca Cola Amatil that went nowhere because the US parent of CCA (The Coca Cola Company) wouldn’t agree.

Lion Nathan’s key brands are Tooheys, Boags, Castlemaine, XXXX, Hahn and Swan in Australia plus Steinlager and Speights in New Zealand. Key Wine brands include Wither Hills, St Hallett, Preece, Petaluma and Argyle. It also distributes Becks and Heineken premium beers in Australia.

Kirin will pay the equivalent of $12.22 for each Lion Nathan share it does not already own (that’s around 54%).

The price includes $11.50 per share to be paid by Kirin, and another 72 cents to be paid by Lion Nathan as a fully-franked cash component.

The deal values Lion Nathan at $6.5 billion.

Kirin has done some interesting shuffling of assets in Australia in recent years. It originally had a dominant stake in the San Miguel group of the Philippines. It bought Boags’ brewing business in Tasmania, then Berri Juices and then National Foods. Around 18 months ago Kirin shuffled those, doing a deal with San Miguel to buy National Foods and Berri and Lion Nathan. Kirin then bid heavily for Dairy Farmers when the farmer owners of the NSW co-operative saw the money and wanted to run.

Then, the attempt to use Lion to grab CCA. When that failed, the market watched and waited for Lion to be approached, but failed to mark up the shares. That happened last week and now Kirin (ACCC willing, and haven’t they been willing) has assembled the dominant beverages group in Australia. All it needs is another liquor business, perhaps the private equity owned Independent Liquor in NZ.

kirin

Peter Fray

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