E-Malt.com News article: Australia: Kirin’s buyout offer to Lion Nathan convinces Coca-Cola Amatil it was right to reject a takeover from the Australian brewer

Coca-Cola Amatil Ltd (CCA) says the very high price offered by Japan's leading brewer Kirin to buyout the Australian Lion Nathan Ltd has vindicated its decision to reject an earlier takeover offer from Lion, the Associated Press communicated on April, 29.

CCA chief executive Terry Davis questioned whether the Japanese beer maker, which along with its peers is buying Australian and New Zealand companies to boost profitability, will succeed in its $3.3 billion offer.

"What has happened is that the very high multiples paid for Lion Nathan validates the board's, and Coca Cola's, decision that the offer was unsatisfactory," Mr Davis said.

"Asahi, Suntory and Kirin have all paid very high multiples for the businesses they've bought and we'll just have to see what changes they'll make."

On February 9, Lion Nathan formally abandoned a $7.6 billion cash and share offer for CCA.

CCA had calculation the bid represented a 10.5 times earnings multiple based on end of day share prices on February 3.

This week, Australia's second biggest brewer Lion Nathan agreed to a $3.3 billion offer by Kirin for the shares the Japanese brewer didn't already own.

The bid represents an offer value to estimated earnings before interest and tax (EBIT) ratio of about 15 times.

Over the past 18 months, Kirin has bought National Foods and Dairy Farmers.

Asahi has bought the local Schweppes business and Suntory bought New Zealand fruit juice maker Frucor, all for offer value to estimated EBIT ratios of between 14 and 27 times, according to broker UBS.

"Only time will tell if a beer company can make a difference to a milk company," Mr Davis said.

Still, he said he understood Kirin's logic.

"In Japan they're faced with a declining domestic economy and Australia is a wonderful place to invest money in," he said.

Mr Davis also said he expected the Federal Government to include more economic stimulus in the upcoming budget.

"I think it's inevitable," he said.

But "the best thing the Federal Government can do is make sure the financial system remains strong.

"The handouts must have an impact and we've seen that," Mr David said.

"Whether that's sustainable is another matter."

Previously, Coca-Cola Amatil had made public its plans of becoming Australia's third largest brewer by 2012.


30 April, 2009