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Fri, Nov 23, 2007 - Page 10 News List

Japan Tobacco and Nissin Food plan to purchase Katokichi

AP , TOKYO

Japan Tobacco and Nissin are buying scandal-ridden Katokichi in a deal exceeding ?100 billion (US$917 million) that would create Japan's biggest frozen food maker, the companies said yesterday.

Competition is intensifying in Japan's food industry because an aging population is shrinking the market. Higher raw material costs have also hit the industry. Also, Japan Tobacco Inc, the world's third-largest tobacco company by sales volume, is hoping to branch out into other sources of revenue -- such as food and pharmaceuticals -- as the number of smokers nose-dives in Japan.

Japanese instant noodle maker Nissin Food Products Co, meanwhile, has been seeking to boost its strength in the increasingly cutthroat Japanese food industry. It bought Japan's fourth-biggest instant noodle maker Myojo Foods Co last year.

Under yesterday's deal, JT will launch a tender offer between Wednesday and Dec. 26 to buy shares in Katokichi Co it doesn't already own for ¥109.19 billion (US$999 million), or ?710 a share.

After the purchase, Japan Tobacco and Nissin, which makes Cup Noodles, will hold Katokichi together.

JT will transfer a 49 percent stake in Katokichi to Nissin and hold the remaining 51 percent stake. JT now holds about a 5 percent stake in Katokichi, based in western Japan.

Under the accord, each of JT's and Nissin's frozen food business will be transferred to Katokichi to create an operation with annual sales of ¥260 billion.

Katokichi said it has agreed to the tender offer. Earlier this year, Katokichi was hit with a scandal that centered around claiming trading among business partners without moving merchandise.

The scandal left behind a loss of ?17 billion, producing a 38 percent fall in sales.

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