Kirin Holdings Co rose the most in nine months in Tokyo trading yesterday after the Nikkei Shimbun reported Japan’s biggest beverage maker may merge with Suntory Holdings Ltd as demand wanes for beer and soft drinks.
Kirin advanced as much as 11 percent, the most since Oct. 14, and traded 8.4 percent higher at ¥1,400 (U$15.18) at the 11am trading break in Tokyo yesterday. The stock was the second-biggest gainer on the Nikkei 225 Stock Average, which fell 1 percent.
Kirin this year announced purchases worth more than US$4 billion, including taking full control of Australian brewer Lion Nathan Ltd, as its main Japanese beer business shrinks. The combination with Suntory would create a drinks company with higher sales than Coca-Cola Co and consolidate Kirin’s position as Japan’s top-selling beer maker.
“A merger with a major firm like Suntory is the best way for Kirin to address its need to strengthen earning power in its domestic business,” Naomi Takagi, a Tokyo-based analyst at JPMorgan Chase & Co, said in a report to clients yesterday. “The first benefit of the merger would be an increase in the company’s ability to control prices.”
The Japanese companies are in talks and may agree to merge this year, the Nikkei reported, citing unidentified people.
Kirin president Kazuyasu Kato and Suntory president Nobutada Saji began talks at the end of last year, the report said.
Makoto Ando, spokesman of Tokyo-based Kirin, and Suntory spokeswoman Aya Takemoto both declined to confirm or deny whether the companies were in talks.
Suntory is not listed and controlled by Saji and his family. Sapporo Holdings Ltd, which like Suntory has about 12 percent of Japan’s beer market, has a market value of ¥216 billion (US$2.3 billion).
“The problem in a shrinking market is overcapacity, so they may share production,” said Tomonobu Tsunoyama, an analyst at Tokai Tokyo Securities Co, who has a “neutral” rating on Kirin shares. “They will likely keep their brands, as they have a long history.”
Kirin makes Ichiban Shibori beer and Kirin Lager, and distributes brews in Japan made by Heineken NV and Anheuser- Busch InBev NV. Suntory brews Malt’s and Super Magnum Dry, and distributes for Carlsberg A/S.
“Kirin is likely to be the acquirer,” said Taiji Okusu, managing director at Credit Suisse Securities (Japan) Ltd.
He said a takeover would be examined by Japanese regulators as the combined company would have about 50 percent of the domestic beer market.
Kirin led Japan’s beer shipments in the first half, edging out Asahi Breweries Ltd for the first time in three years. Kirin had a 37.5 percent share of the beer market, followed by Asahi Breweries Ltd with 36.9 percent, Suntory with 12.7 percent and Sapporo with 12.1 percent.
Sapporo shares rose as much as 9.9 percent yesterday in Tokyo and Asahi gained up to 4.9 percent. Mercian Corp, Kirin’s wine unit, jumped as much as 10 percent.
“The merger of two majors could accelerate realignment of the beverage industry,” Takagi said.
Kirin and Suntory began joint distribution of soft drinks in Chiba Prefecture near Tokyo this month. They consolidated their distribution centers.
Kirin has forecast total beer sales in Japan this year will fall 1.7 percent to ¥749 billion after declining 3 percent last year.