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Asahi thirsty for more overseas deals after SABMiller purchases
[TOKYO] Asahi Group Holdings Ltd wants to grow its overseas business to about a third of sales with more acquisitions after agreeing to buy about US$11 billion of SABMiller Plc's brands as Japan's largest brewer seeks to offset a falling beer market at home.
"The domestic market is turning out stable cash flow but we want overseas markets to be our growth engine," Asahi President Akiyoshi Koji, 65, said in an interview Tuesday at the brewer's Tokyo headquarters.
The company will also decide on options for its minority stake in China's Tsingtao Brewery Co this year, according to Mr Koji.
"Ownership without control doesn't make much sense," he said, referring to the company's 20 per cent stake in Tsingtao.
Japanese makers of consumer goods like beer and cigarettes are scrambling to expand overseas as the domestic population shrinks and becomes more elderly. Asahi, the country's biggest brewery, is also contending with intensifying competition in its home market, from rival Kirin Holdings Co and upstart craft beer makers.
Asahi is considering overseas acquisitions as it plans to increase revenue outside of Japan to 33 per cent, up from the 24 per cent after its latest purchases are completed, Koji said. The company has targets it's considering, but it may not have the cash to do another large deal before 2020, he added.
Any further deals would come as it digests almost US$11 billion in deals last year of two groups of SABMiller's European brands, which included the popular Czech beer Pilsner Urquell. SABMiller was taken over by Anheuser-Busch InBev NV.
Those deals will advance Asahi as Europe's third biggest brewer once the latest agreement closes in the first half of 2017. The brewer's shares have gained 1.1 per cent this year. The stock fell 2.9 per cent in 2016, compared with the 1.9 per cent drop in Japan's benchmark Topix index.
The brewer, whose Super Dry brand is Japan's best-selling beer, will raise funds for the European deals through corporate bonds or bank loans, Mr Koji said. The company does not plan to issue new shares, he said.
Financing for last year's deals could push Asahi's debt to equity ratio above historical levels, according to ratings agency R&I, which last month put Asahi on a watch-list for a possible downgrade. Analysts had said the brewer might have overpaid for its new businesses.
Asahi's expansion plans extend outside of Europe. The Tokyo-based brewer is one of several companies that have registered to buy a stake in Vietnam's biggest beer maker, Saigon Beer Alcohol Beverage Corp, according to Sabeco's chief executive officer. Mr Koji declined to comment on Sabeco.
The Japanese beer market has shrunk twelve years running. Shipments of beer and near-beer substitutes from the country's five big brewers fell 2.4 per cent in 2016. Asahi accounted for 39 per cent of the market, while closest competitor Kirin Holdings Co had 32 per cent, according to the companies.
"It makes sense to expand outside of Japan, demographics make that the priority here," said Bloomberg Intelligence analyst Duncan Fox. While Asahi may want to retain a stake in Tsingtao due to future growth in China, it could opt to sell one high growth asset for another as "there are other Asian assets potentially available, not least in Vietnam," he said.