Kirin, Suntory said to agree on big drinks merger terms

Japanese drinks giants Kirin Holdings and Suntory are close to reaching merger terms, creating one of the world’s largest beverage and food companies.

A merger would have huge implications for New Zealand, possibly involving an investigation by the Commerce Commission for competition issues.

Kirin is the parent company of brewing, wine and spirits company Lion Nathan, while Suntory-owned Frucor is a leader in soft drinks and juices.

The two Japanese companies have been in talks for several with a merger ratio being the key hurdle to overcome in their planned integration.

Reports from Japan say this will likely be one Kirin share to 0.7 Suntory share, meaning Kirin's stake in the new company will be about 60% and Suntory's about 40%.

The ratio is roughly in line with market expectations, though slightly more favourable for Kirin shareholders than predictions by some analysts that the ratio could come to 1 to 0.8.

"Uncertainties over the merger ratio have been weighing on Kirin's shares," said Tomonobu Tsunoyama, an analyst at Tokai Tokyo Research Centre.

The firms are planning to combine their operations in the northern spring of 2011 and Kirin president Kazuyasu Kato and Suntory president Nobutada Saji will meet soon in an effort to reach an agreement, the Nikkeinewspaper said, adding that a merger announcement is likely by the end of next month.

Founding family

The ratio would give the founding family of Suntory a more than 33.4% stake in the merged firm, allowing them to veto board decisions.

The founding family holds about 90% of Suntory.

"Suntory's founding family would have significant control over the new company if it gets a one-third stake, and I am wondering if Kirin would allow that to happen," said Kenzo Sato, senior analyst at research firm TIW.

Nikkei said the founding family is expected to agree to respect the decisions of the new firm's management.

Kirin said in a statement that it had not made an announcement on the matter and that the report was based on speculation.

Suntory spokesman Kozo Bo said nothing had been decided.

Shares of Kirin jumped 3.6% to ¥1480 yen on the news, outperforming the benchmark Nikkei average, which was up 1.6%.