Suntory To Buy GlaxoSmithKline Drink Brands for $2.1 Billion

Image: Suntory To Buy GlaxoSmithKline Drink Brands for $2.1 Billion

Tuesday, 10 Sep 2013 01:08 PM

By Michael Mullins

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Japan's Suntory Beverage & Food Ltd will acquire Britain's GlaxoSmithKline Plc's Lucozade and Ribena drink brands for $2.1 billion in an attempt to expand into the soft drink market in Europe and emerging markets in parts of Africa.

Best known for its beer and Yamazaki whisky, Suntory is Japan's largest brewing and distilling company group, founded in 1899 in Osaka, Japan.

In a statement on Monday, GlaxoSmithKline said on the London Stock Exchange that proceeds will be used partly to reduce its debt.

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The transaction is expected to be completed by the end of the year, Bloomberg News reported.

"One of Suntory's main rating constraints has been its geographic concentration as about 80 percent of sales comes from domestic sources," Moody's Investors Service said in a release. "Acquiring these UK brands will improve its geographic diversification."

"Since it’s already a known brand, they’re not going to have a problem putting it on the shelf," Mikihiko Yamato, deputy head of research in Tokyo at JI Asia, told Bloomberg News in regards to Lucozade.

"Suntory may want to start a new category within the energy drinks market," Yamato added.

Lucozade consists of a series of energy and sports drinks, which competes with the likes of PepsiCo Inc.’s Gatorade and Coca-Cola Co.’s Powerade, while Ribena is a concentrated fruit-based soft drink geared toward children.

Suntory will acquire global rights to the brands and Glaxo’s Coleford manufacturing site, Bloomberg News notes.

In 2012, the two brands combined earned just over $800 million in sales, with Ribena falling two percent and Lucozade sales rising four percent.

In addition to the expansion in the European soft drinks market, Suntory's deal on Monday will also allow the beverage company to expand operations in other nations of the world, including Nigeria, South Africa and Malaysia.

A GSK spokesman said there was expected to be very little, if any, impact on jobs as a result of the sale.

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Other potential buyers that had been eyeing Lucozade and Ribena included Blackstone, Lion Capital, Cinven, CVC Capital Partners and KKR. Many had prepared bids for an auction that never happened.

The acquisition follows Suntory's purchase of the Orangina Schweppes Group in 2009 for $3.3 billion.

Related stories:

Suntory May List Unit in $5 Billion Tokyo IPO

Suntory Set to Evaluate M&A Targets With $4.9 Billion for Deals

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