Reuters: Financial Services and Real Estate: UPDATE 1-Asahi to buy Japan drinks maker Calpis for $1.5 bln

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UPDATE 1-Asahi to buy Japan drinks maker Calpis for $1.5 bln May 8th 2012, 07:06 Tue May 8, 2012 3:06am EDT * Biggest deal yet in a slew of acquisitions by Asahi * Calpis buy makes Asahi Japan's No.3 soft drinks firm * Asahi to fund deal with cash in hand, borrowing TOKYO, May 8 (Reuters) - Brewer Asahi Group Holdings said it will buy soft drinks maker Calpis Co for about 120 billion yen ($1.5 billion), its largest deal to date as it seeks new revenue sources, and a move that could hasten a realignment of Japan's beverage sector. Faced with a declining population, uncertain economic prospects and constant deflation at home, Japanese beer makers have been on a spending spree as they attempt to diversify their profit sources and solidify existing earnings bases. The purchase of Calpis, known for its namesake milky soft drinks, makes Asahi Japan's No.3 non-alcoholic beverage maker, and brings to focus the nation's crowded beverage market where a slew of players are fighting for pieces of a shrinking market. Asahi will hold a press conference at 0800 GMT in Tokyo which President Naoki Izumiya is scheduled to attend. The plan to buy Calpis from seasonings maker Ajinomoto Co - first flagged to the market after reports last month by Reuters and other media - comes on top of some $3.7 billion in deals done by Asahi over the past five years. The maker of Japan's top-selling "Super Dry" beer has taken stakes in China's Tsingtao Brewery, bought the Australia business of Schweppes and last year spent nearly $1.2 billion for New Zealand beverage group Independent Liquor, its largest deal to that time. Asahi will fund the purchase of Calpis, a drink popular with Japanese children, with cash in hand and by borrowing. The beer maker aims to complete the deal by October. With the purchase of Calpis, Asahi will move ahead of rival brewer Kirin Group Holdings and tea maker Ito En in Japan's soft drinks market, but will still lag bottlers of Coca-Cola Enterprises and unlisted Suntory Holdings. Asahi has long been looking to bolster its domestic soft drinks business, which it expects to account for 22 percent of its forecast for nearly 1.6 trillion yen in sales for the year to December, significantly less than the 62 percent it is looking for from alcoholic beverage sales at home. Merrill Lynch advised Asahi on the latest deal, while JP Morgan acted for Ajinomoto. Shares of Asahi settled 0.3 percent higher prior to the announcement, compared with a 0.7 percent gain in the benchmark Nikkei 225 average. Link this Share this Digg this Email Reprints

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