After coming to an impasse over the management hierarchy of a potential new entity, Japanese brewing companies Kirin and Suntory have ditched plans to merge their food and beverage groups.
The new company would have had combined revenue of over $40 billion and discussions have been ongoing since 2009, consolidation being desperately needed to keep pace with global competition in a cut throat international market. Expansion abroad is essential with a domestic market that continues to get older and smaller.
The two companies come from very different backgrounds, and this may have been a critical factor stopping the deal from progressing. Kirin is based in the nation’s capital and is very corporate in nature. It’s also listed on the Tokyo stock exchange. Conversely, Suntory is much more of a family orientated smaller group, based in Osaka.
Kirin’s share prices slumped nearly 8 percent on Tuesday after news the merger had collapsed was made public, sparking a trading frenzy involving 17 million of the company’s shares. The new entity could have rivalled top groups like Kraft and Pepsicoinc with regards to revenue.
The unravelling of the deal caused investor nervousness in the Japanese market and another brewery, Asashi, saw their stock decline 6 percent. Clarus China Everbright, an investment firm who has a small stake in Asashi, said in an email to clients on Wednesday that the market may be over-reacting to the news.
Other analysts agree, Sompo Japan Asset Management chief of finances Shigeo Sugawara said that there has been an “unnecessary jolt to the exchange” and Kirin’s share prices have already “had the possibility of a merge collapse dialled in”.
Sugawara added “The deal falling through is not good for Kirin. As a large, listed company in search of growth the Suntory deal was really the only one on the table for them. They are going to have to be creative in order to find further opportunities now.”
Kazuyasu Kato, the Kirin President, made a brief statement to the press following the conclusion of talks, “It was understood by both parties that we would never come to an agreement regarding the executive structure of the new company. It would not be fair to our shareholders to progress”.
In a statement released later a spokesperson for Suntory, known for its ‘Premium Malt's’ beer and ‘Boss’ canned coffee cited a “disagreement over the merger ratio” as the deciding factor.
