JAPAN: Japanese drinks juggernaut Kirin Holdings Co. Ltd. has agreed to a $1.2 billion buyout of Australian vitamin manufacturer Blackmores Ltd., advancing the company’s diversification plan and giving shareholders a nice exit.
The deal fulfils a plan by Kirin to diversify its business beyond alcoholic drinks as rising interest in health raises the anticipation of stricter regulation.
Additionally, it offers Blackmore’s stockholders a lifeline after years of low profits. The business leveraged Chinese demand for imported health supplements to grow from Australia’s first health food store more than a century ago into a national success story.
However, COVID-19 containment put a stop to the “daigou” boom, in which Chinese consumers bought products abroad to bring back to their country, and the company has subsequently had difficulty recouping lost sales. When the daigou craze was at its height in 2016, Blackmore’s stock was trading at a third of its value prior to the Kirin deal.
Marcus Blackmore, the company’s former chairman and its top stakeholder with 19%, stated, “When you’ve worked at a business for 57 years, you don’t want to see the business suffer, and you want to see the business successful.”
Kirin, whose alcoholic beverage sales account for roughly half of its total sales, including well-known Australian beer brands like Tooheys, said that merging a Japanese pharmaceutical company with a substantial Australian presence would be advantageous.
At a news conference in Tokyo, Kirin Senior Executive Officer Takeshi Minakata said, “In the health sciences area, Kirin is strong in Japan while Blackmores has a significant foothold in Australia, China, and Southeast Asia.”
“The combination of the two companies will enable us to supplement each other’s coverage in areas that have not been covered so far,” he added.
As a result of the news, Blackmores shares had their highest one-day increase of 23% to A$94.26, narrowly missing Kirin’s A$95 purchase price. Investors deemed the agreement to be final while taking dividends that might be paid into the account, which would be deducted from it.
Kirin shares declined as much as 3% as analysts worried that it overpaid.
“The deal just looked a bit expensive, and Japan generally takes M&A negatively. A little surprised it isn’t down more,” stated Mio Kato, the founder of LightStream Research.
The transaction takes place amid an M&A frenzy in Australia that market observers anticipate will continue soon. Japanese businesses seeking expansion outside of their sluggish home market frequently choose this nation as their destination.
Asahi Group Holdings Ltd. (2502.T) and Kirin are the two biggest breweries in Australia, while Nippon Paint Holdings Co. Ltd. (4612.T) recently paid A$3.8 billion to acquire DuluxGroup Ltd., the country’s biggest paint producer. A year prior, the global asset management division of Commonwealth Bank of Australia was purchased by Mitsubishi UFJ Financial Group Inc. (8306.T) for A$4.1 billion.
Despite stating that it supported the deal, Blackmore’s shareholders will still vote on it in July, and the firms anticipate that the deal will conclude in August. Adara Partners and Barrenjoey Capital Partners are working together as financial advisors.
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