Frucor deal finally in the can

French drinks company Groupe Danone says it has completed the sale of Kiwi drinks company Frucor to Japanese brewer Suntory for €600 million.

Investment bank JP Morgan handled the sale, with Suntory announced as the winner in late October.

Using October’s exchange rate this equates to $NZ1.36 billion, today’s fallen Kiwi dollar puts it at $NZ1.53 billion, either way, Suntory paid a premium to obtain the company.

Analysts believe that Suntory – dominant in the beverage sector in Japan – was feeling the pressure to expand as homeland rivals Kirin and Asahi have been on a buying spree throughout South East Asia and Australasia, using the added offshore capital to squeeze Suntory back at home.

Frucor has total annual sales of around €210 million internationally, Danone says.

Danone acquired the former NZX-listed Frucor in 2002 for $294 million and since then has built up the business both here and in Australia.

According to an information memorandum obtained by NBR at the time, during Danone’s tenure Frucor's New Zealand revenue increased from $NZ210.2 million in 2005 to $NZ222.4 million in 2007, while Australian revenue went from $A120.6 million to $A167.4 million.

While ebitda remained relatively static in New Zealand at about $50 million, in Australia the business has increased ebitda to $A41 million in 2007 from $A23.1 million in 2005.

This divestment stems from Danone’s move to refocus on natural mineral water and spring water-based beverages, as well as move to focus on “core business growth opportunities.”

Danone says it will use the proceeds of the sale to repay debt.

Frucor’s key product has been the V energy drink, which battles toe-to-toe with Red Bull. V holds an estimated 60% of the New Zealand energy drinks market, and 50% in Australia. It is also rapidly expanding through Asia and Europe.

V has been valuated at around $NZ800 million on its own, making up nearly three quarters of the company’s total revenue.

The bidding process quickly became heated as Asahi and Coca-Cola Amatil frantically drove the bidding past the $NZ1 billion mark.

Suntory came as something of a left-field bid, with much of analysts focus being placed on Asahi and Coca Cola Amatil, who were the odds-on favourites.

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