Japan & Australia: Lion Nathan agrees to key terms under which Kirin would take it over

Kirin Holdings Company, Limited announced on April, 27 that it has reached an agreement with Lion Nathan’s Independent Board Committee on key terms under which Kirin would acquire all of the issued shares in the Australian brewer that it does not already own.

The leading Japanese brewer, which acquired its first stake in Lion in 1998, will buy the remaining 287,786,220 shares (54%) in Lion Nathan for an offer consideration of A$12.22 per share.

The deal values Lion at A$6.5 billion (US$4.7 billion), a 47 percent premium over the Australian company’s closing price on April 22, when its shares were suspended before the announcement of the Kirin offer.

Lion Nathan’s chairman, Geoff Ricketts, said the board would unanimously recommend that shareholders accept the offer, provided no higher bid emerged. The deal is also subject to regulatory approval.

If the scheme is approved and implemented, Kirin will own all the issued 534,240,495 shares in Lion Nathan and the latter will be delisted from the Australian Securities Exchange and New Zealand Stock Exchange.

KH's President and CEO, Kazuyasu Kato, commented:

"The proposal to acquire the shares in Lion Nathan we do not already own is a logical next step in achieving our long term growth strategy of becoming a leading company in the areas of beverages, food and health across Asia and Oceania."

"After 11 years as the largest shareholder we have the utmost respect for the Lion Nathan management team and believe together we will grow the Lion Nathan business going forward."

Kirin has said it is seeking to increase its proportion of foreign sales to 30 percent in 2015, from 18 percent in 2006. The Tokyo-based company has announced plans to spend $1.26 billion to raise its stake in the beer unit of San Miguel in the Philippines.

Australia represents a particularly attractive market because its two main beer producers, Lion and Foster’s, command high profit margins.

“The Australian market is almost a cozy duopoly between Foster’s and Lion Nathan, you don’t see the aggressive price competition you have in other markets,” said Vicky Melbourne, an analyst with Fitch Ratings. “Our two largest brewers here compete largely in terms of product innovation.”

That makes Lion a particularly attractive proposition for Kirin, which has struggled against falling demand for its products in Japan. Last week, Lion said its net profits would be 12 to 16 percent higher this year because of strong growth in Australian tap beer sales.