Japan's Kirin in talks to buy 43.25% of San Miguel Brewery for P59 billion

Japanese brewing giant Kirin Holdings Co. Ltd. has secured exclusive rights to negotiate with food and drink conglomerate San Miguel Corp. for the purchase of a 43.25-percent interest in the latter’s flagship brewery firm, a transaction estimated to cost at least P59 billion or $1.26 billion.

In a disclosure to the Philippine Stock Exchange, San Miguel said details of the deal have yet to be firmed up although both parties are targeting to sign a final agreement with respect to the purchase of a stake in San Miguel Brewery Inc. (SMB) by the end of next month.

The sale will reduce San Miguel’s shareholdings in SMB to 51 percent with the balance of five or six percent held by the public.  

Kirin holds a fifth of parent San Miguel Corp. which has recently unloaded some of its units to accumulate funds for new businesses with high growth potential such as power and mining.

In 2007, Kirin bought Australian dairy and juice manufacturer National Foods from San Miguel for $2.6 billion.

Analysts said if the deal pushes through, Kirin would have access to San Miguel’s established production and distribution network instantly and it will be in a comfortable position to develop its overseas beer operations and extend its geographic presence.

Kirin said it believes San Miguel is the right partner to maximize business opportunities and bring synergies among its group of companies in the region. It first invested in San Miguel way back in 2002.

San Miguel revealed in July last year that it was selling its major businesses as part of a corporate restructuring but would retain a 51-percent share in all of the units.

The restructuring may require the divestment of part of its interest in major subsidiaries through either an IPO or follow-on offering and strategic partnerships with existing partners and other industry leaders.

San Miguel would need cash to fund its large-scale acquisitions which include giant oil refiner Petron Corp. 

Last month, San Miguel formed two new wholly-owned subsidiaries for its holdings in the beer business and beer brands. The new companies are Brewery Properties Inc. and Iconic Beverages Inc.

SMB which debuted on the stock exchange last year, offers popular brands such as Super Dry, Cerveza Negra, San Mig Strong Ice, Gold Eagle and Cali (the country’s only malt-based non-alcoholic drink).

San Miguel’s beer brands San Miguel Pale Pilsen, Red Horse, San Mig Light and Gold Eagle, are among the top four brands in the country.

In the nine months ending September last year, SMB reported a 22.8-percent jump in net profit to P7 billion on the back of a six-percent growth in sales volume. Sales revenues rose 10 percent to P35.2 billion while operating income increased 22.5 percent to P10.8 billion on strong beer consumption and intensified marketing activities.

SMB which contributes around 40 percent of group operating profit, is undertaking new programs to offer wider availability and ensure consumer satisfaction.