Kirin Seeks Snappier Southeast Asia Deals After Losing F&N

Kirin Holdings Co. wants to become more aggressive in buying Southeast Asian companies after the sale of its stake in Singapore-based conglomerate Fraser & Neave Ltd. stunted its growth in the region.
“It has been frustrating especially since we sold our shares in F&N,” Hiroshi Fujikawa, Kirin’s managing director for the region, said in an interview. “We’ll keep watching the market opportunities and maybe sometimes, we have to do it aggressively or proactively.”

Kirin last month acquired a controlling stake in Myanmar’s biggest brewer for $560 million, as it seeks to boost sales from developing markets to help offset falling beer consumption in Japan. The Tokyo-based brewer had bowed out of a bidding war for F&N in 2013, selling its 15 percent stake in the conglomerate.
Japan’s second-largest listed brewer lost out on the opportunity to use F&N to expand in Southeast Asia and this will prompt Fujikawa to move faster once he identifies a suitable target, the Singapore-based Kirin executive said. He sees Indonesia, Vietnam and Thailand as the company’s top potential markets in the region because of the large size of their populations.

Kirin shares ended 4.7 percent higher at 1,692 yen by the close of trading in Tokyo, its largest gain in more than two years. Japan’s largest listed brewer Asahi Group Holdings Ltd. rose 5.4 percent, while third-place Sapporo Holdings Ltd. jumped 6.8 percent. The benchmark Topix index spiked 6.4 percent amid a wider rally in global stocks.
Limited Opportunities

For now, acquisition opportunities in the region are limited as family owners of potential targets haven’t been willing to cede majority control, according to Fujikawa, a 30-year Kirin veteran who’s been based in Singapore since 2010. Asking prices are also too high, he said.

“If they would want to sell their businesses at the highest price, I’m not going to be interested,” he said. “If they would like to grow their brand or businesses in their own market, I’m happy to talk and discuss investment opportunities.”

Making acquisitions would be one way to break into the Southeast Asian market, said Carmen Lee, head of research at Oversea-Chinese Banking Corp.

“It’s very tough to compete against the incumbents in the region because of the intense competition,” she said. “Beer business is all about the network and distribution, which is the key thing.”
Myanmar Emergence

Kirin’s Myanmar deal announced on Aug. 19 was its largest in Southeast Asia since it paid S$1.34 billion ($941 million) for an F&N stake in 2010 and invested $1.5 billion in Philippine’s San Miguel Brewery Inc. in 2009. The Japanese company grabbed the stake in Myanmar Brewery less than two weeks after F&N had to sell the same stake following a two-year long dispute with its local partner.

Beer sales in Myanmar rose 14 percent to $265 million between 2009 and 2013, and are forecast to hit $675 million by 2018 as its middle-class grows, according to researcher Euromonitor. The country’s emergence from economic isolation in 2012 has drawn companies from Heineken NV to Coca-Cola Co., keen to access its estimated 54 million consumers.

Kirin plans to spend about $100 million to double production capacity at the maker of the Southeast Asian country’s top-selling Myanmar Beer over the next three to five years, boosting annual output to 4 million hectoliters per year, Fujikawa said.

“The economic and political environment will change significantly in the next 5 to 10 years in Myanmar, so we have to change as well,” he said. “I want to keep Myanmar Brewery a little ahead of other players, whether it is selling more beer or making more profit.”

Source: Bloom Berg

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