Suntory Bev buys JT's vending machines to close gap with Coke

[TOKYO] Suntory Beverage & Food Ltd, which sells PepsiCo Inc drinks in Asia, will buy Japan Tobacco Inc's vending machines for about 150 billion yen (S$1.66 billion) to add to its own, closing a distribution gap with Coca-Cola Co in the country. JT's shares hit a record high.

JT will sell its vending machine units and transfer two of its beverage brands to Suntory Beverage, the cigarette-maker said in a statement on Monday. Suntory Beverage, which sells Pepsi alongside bottled green tea and carbonated juice, will acquire about 260,000 machines through the deal, its executive vice president Saburo Kogo said in a briefing in Tokyo.

Coca-Cola, the world's largest beverage company, has the most drinks vending machines in Japan, with 980,000 of the devices installed throughout the country. Adding JT's machines to Suntory Beverage's 490,000 will allow the latter to better compete, according to Kazuhiro Miyashita, a board member at researcher Inryosoken.

"I see Suntory is serious about overtaking Coca-Cola," Mr Miyashita said on Monday. "Vending machines are the best sales channel for soft drinks and this would be the way that allows Suntory to win the competition."

JT rose as much as 1.9 per cent in Tokyo trading, extending gains for a seventh straight session and hitting a record high. Its shares were up 1.8 per cent at 4,785 yen as of 9:05 am local time, while Suntory Beverage rose 0.6 per cent to 5,190 yen. The benchmark Topix gained 0.2 per cent.

Japan has a total of about 2.5 million vending machines that peddle more soft drinks than all the convenience stores nationwide, according to data from the Japan Vending Machine Manufacturers Association.

JT had approached potential buyers about a deal, including Asahi Group Holdings Ltd and several private-equity firms, people familiar with the matter said last month.

Takeshi Niinami, president of parent Suntory Holdings Ltd, had said in February that Suntory Beverage was looking into the acquisition. JT was exploring the sale after saying in February it would exit its drinks business for the "Roots" and "Momono Tennensui" brands.

BLOOMBERG