Monday, February 8, 2010

Kirin and Suntory will not merge



Suntory and Kirin have called off their merger talks.

The sticking point appears to have been the controlling stake that the family that owns Suntory would have had in the new structure. The merger was attempting to bring together a publicly listed company (Kirin) and a relatively small but almost completely family-owned private company (Suntory). The Suntory family would have ended up with a controlling holding of about a third of shares in the new entity. This was evidently too much for Kirin's existing management and owners. (Update: Wall Street Journal has a quote from a Kirin spokesperson: "We not only disagreed on the merger ratio. We could not reach an accord because of various other factors, and decided that we cannot see the new entity maintaining independence and transparency as a public company.")

As I say, the news is good for whisky lovers. The merger would have joined Kirin's relatively weak whisky operation (Fuji-Gotemba and Karuizawa) and Suntory's very strong distilleries (Yamazaki and Hakushu) in a stagnant/declining market. Some sort of rationalisation would probably have been on the cards.

From a whisky perspective (only a sideshow in this deal), the main point of interest moving forward is whether Kirin is going to get itself a cogent whisky strategy. As it is, they seem to be sidelining their strongest single malt brand (Karuizawa) and yet not really pushing anything convincing out of their mass market whisky facility at Fuji-Gotemba (which is understandable, because the challenge of getting themselves ahead of Suntory and Nikka's domestic whisky brands is going to be extremely difficult.)

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