Kirin to sell Lion Dairy & Drinks, receives approaches

Japanese brewer Kirin will attempt to recoup some of the $2 billion it has blown on Australian dairy and drinks investments over the past 11 years by selling leading brands such as KIng Island cheese, Dairy Farmers milk and Farmers Union yoghurt.
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Kirin has kicked off a formal sale process for its $1.8 billion Australian dairy and juice business, Lion Dairy & Drinks (LDD) after completing a strategic review earlier this week.
Lion, which is 100 per cent owned by Kirin, launched the strategic review last month and considered options including selling the business, selling individual assets and further restructuring.
Rather than persist with restructuring and inject further capital into the business, Kirin has decided to pull the plug, sell LDD in its entirety and reinvest the proceeds into its Australian and overseas beer, wine and non-alcoholic beverages businesses.
Lion chief executive Stuart Irvine said on Wednesday LDD, which has annual sales of about $1.8 billion, needed new capital to take advantage of changing consumption trends.
«The sale process will focus on finding the right owner to take LDD forward and unlock its full potential,» Mr Irvine said.
Lion has appointed Deutsche Bank, King & Wood Mallesons and Greenhill and Co as advisers.
Approaches
Lion has already received unsolicited approaches from potential buyers and will now formally engage with interested parties.
The leading candidate is thought to be Coca-Cola Amatil, which is attempting to shift its drinks portfolio away from sugary soft drinks to better-for-you and functional beverages.
Just last week CCA snapped up a 45 per cent stake in functional beverages business Made Group in partnership with its 30 per cent shareholder The Coca-Cola Co.
Last month Coca-Cola bought full control of Australia’s first kombucha maker, Organic & Raw Trading Co, which makes the MOJO brand. That deal came six months after Lion bought a minority stake in Remedy Kombucha, the market leader in the fast-growing $200 million kombucha category.
In a report last week Citigroup’s head of research, Craig Woolford, said the acquisition of Lion’s dairy, fruit juice, plant-based beverage and yoghurt brands and cold supply chain would make sense for Amatil, helping the bottler plug glaring gaps in its product range and accelerate sales growth.
Mr Woolford estimated an acquisition would cost between $800 million and $900 million, representing a multiple of 18.5 to 21 times earnings before interest and tax. It would boost sales by 19 per cent in the medium term and would be value accretive.
Other potential buyers include Brisbane-based dairy processor Parmalat, which is owned by the Lactalis Group, Canadian dairy giant Saputo, which outlaid $1.3 billion for Australia’s largest dairy processor Murray Goulburn in May (and would likely face competition concerns), Asian food and dairy companies and private equity.
Kirin paid $2.8 billion for the then National Foods in 2007 and $910 million for NSW-based co-operative Dairy Farmers in 2008, but has struggled to achieve a satisfactory return on its investment. The Japanese brewer has written down the value of LDD by $2.14 billion since 2010.
LDD is Australia’s second-largest milk processor after Murray Goulburn, with an estimated 19 per cent share of the milk processing market, and buys close to 1 billion litres of milk a year, according to IBISWorld.
It owns category leading brands such as King Island and Southcape cheese, Dairy Farmers and Pura Milk, Yoplait and Farmers Union yoghurt, Big M and Dare flavoured milk and Berri fruit juice.
Declining sales
However, sales and earnings have been in decline for years as the business struggled to recoup rising costs amid stiff competition from other processors and pricing pressure from Coles and Woolworths, including $1 a litre milk.
Over the past three years Lion has closed plants, shut down its international unit, sold its everyday cheese business, trimmed staff and slashed the number of product lines to reduce costs, reinvesting the savings into innovation and new product development.
The business appears to be finally turning around and Kirin is forecasting a 27 per cent increase in Dairy & Drinks earnings to $79 million on sales of $1.85 billion in 2018.
Mr Irvine said the sale of LDD would have no impact on Lion’s beer businesses in Australia and New Zealand and the company would continue to explore opportunities in growing high-margin alcoholic and non-alcoholic beverages.

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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