Suntory goes for it with Orangina bid

September 10, 2009

ORANGINA/True to its “Yatte Minahare” motto — “Go for it!” in Osaka dialect — Japanese brewer Suntory is sizing up a takeover bid for private-equity owned soft drinks maker Orangina Schweppes.

Although Suntory is already in the midst of a takeover by larger rival Kirin, that hasn’t quenched its thirst for growth as it looks to Orangina for new brands and markets.

But splashing out $2.6 to $3.0 billion — the price range being touted for the somewhat eclectic Orangina drinks cabinet, whose brands include Snapple, Oasis and La Casera — would be pushing Suntory’s mantra to the limit. The mooted price is in line with what current owners Blackstone and private equity partner Lion Capital paid for Orangina three years ago, when the credit boom was in full swing.

Orangina has added some bolt-on deals since but its sales in 2008 —  before the recession fully began to bite  — were some $1.46 billion, so Suntory would be paying more than twice that figure to take the company off the hands of Blackstone and private equity partner Lion Capital.

By comparison, British soft drinks group Britvic — with net debt of 400 million pounds — has an enterprise value of 1.14 billion pounds against revenues in 2008 of 927 million pounds, an EV/sales ratio of 1.2.

Some 80 percent of Orangina’s revenues come from its household names — Orangina, Schweppes, Oasis, Trina, Pulco and La Casera — which are among a total of 22 brands. The group has targeted strong positions in local markets with these which should mean sales will remain fairly stable.

While Japan offers limited growth, Suntory can’t be looking to countries like France, Spain, Italy, Belgium or Britain for stellar expansion. The only growth market of any size where Orangina — which boasts some 500 million customers in 60 countries — owns a local brand is Ukraine.

And after three years in private equity hands, Suntory can’t expect to find many costs left to cut either in Orangina’s factories or among the company’s 2,500 staff.

What Suntory will find in Orangina is a wider distribution network for the Japanese company’s green teas and health drinks to increasingly adventurous Western European consumers.

Suntory appears to be willing to pay a hefty price for assets which European groups including Cadbury Schweppes and Pernod Ricard decided were not worth holding on to in the past. The combined Suntory-Kirin will need more than a punchy motto to make this deal work.

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