Kirin buys 43.25% of San Miguel Brewery for P59-B

The Philippine Star

Posted at Feb 20 2009 10:59 AM | Updated as of Apr 15 2009 12:23 AM

Japanese brewing giant Kirin Holdings Co. Ltd. has sealed a deal with San Miguel Corp. for the purchase of a 43.25-percent stake in the latter's flagship domestic brewery firm for P58.9 billion and the possible takeover of San Miguel's international beer operations.

In a disclosure to the Philippine Stock Exchange, San Miguel said Kirin has obtained exclusive rights to negotiate for the purchase of the food and beverage giant's overseas beer business. The exclusivity period is for six months.

Under the agreement, Kirin will acquire shares of San Miguel Brewery Inc. (SMB) for P8.841 each share. The deal will still leave San Miguel with a majority 51 percent stake in SMB, which produces and markets San Miguel Pale Pilsen, Red Horse, San Mig Light and five other affiliated brands.

Kirin, which has been a strategic equity partner of San Miguel since 2002 owning around 20 percent, will launch a tender offer to buy the remaining shares held by the public at the same price offered to the food and beverage conglomerate. The details of the tender offer will be announced by Kirin once determined.

"We are extremely pleased that we have reached an agreement with Kirin. Our alliance will create exciting opportunities on multiple fronts for our brewery business. We need a strong partner for our brewing business particularly as San Miguel begins to branch out into other industries, and I am confident that as a result of Kirin's direct buy-in, our beer products will see higher sales and even better efficiencies going forward," Ramon S. Ang, president and chief operating officer of San Miguel, said.

At the same time, Kirin, Japan's second largest brewer, said it would sell its entire 19.9-percent stake in San Miguel to Q-Tech Alliance Holdings Inc. for $800 million and book a loss of $276.2 million as a result.

Q-Tech Alliance is a Philippine investment holding company whose stockholders include a unit of Qatar Telecom (Qtel), San Miguel's joint venture partner in its foray into broadband technology and Roberto Ongpin and Eric Recto – the local representatives of UK fund manager Ashmore Group in oil refiner Petron Corp., another prized San Miguel investment.

"For our employees and customers, I see this as a great opportunity. Kirin's strengths in brewing technology and materials sourcing, combined with San Miguel's long tradition of product quality and strong brands are a winning combination," he added.

With the purchase, Kirin would have access to San Miguel's established production and distribution network instantly and will be in a comfortable position to develop its overseas beer operations and extend its geographic presence.

The Kirin Group's long-term business vision is to be a leading company in Asia and Oceania, promoting a strategy focusing on profitable operations in this region.

Kirin earlier said it was allotting 300 billion yen on acquisitions to spur growth and boost contributions from overseas sales to 30 percent by 2015 from 18 percent in 2006.

Through its buy-in into SMB Kirin and San Miguel plan to reinforce their strategic relationship in the regional beer business, accelerating the creation of synergies between the two companies.