Suntory to buy GSK's Lucozade, Ribena drinks for $2.1 billion

Mon Sep 9, 2013 8:39am EDT
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By Ben Hirschler and Ritsuko Shimizu

LONDON/TOKYO (Reuters) - Japan's Suntory Beverage & Food Ltd is to buy GlaxoSmithKline Plc's Lucozade and Ribena brands for 1.35 billion pounds ($2.1 billion) to help it expand into new markets.

The deal had been expected since people close to the process said last week Suntory - best known for beer and Yamazaki whisky - was in advanced talks on a purchase that would pre-empt an auction of the British drinks.

Japan's second-largest drinks maker by sales after the local arm of Coca-Cola Co has plenty of cash after raising $4 billion in a stock market flotation in June. It was always seen as the most likely buyer for the brands after GSK announced plans for their disposal in April.

The energy and blackcurrant drinks are popular in Britain but from GSK's point of view lack global reach, especially in the big emerging markets that are becoming the focus of the British drugmaker's consumer health business.

For Suntory, however, they offer a growth opportunity to counter sluggish demand at home.

One person at a private equity firm which had considered a rival bid said Suntory was paying "a very hefty price", explaining GSK's willingness to allow it to pre-empt an auction.

Lucozade and Ribena, introduced in 1927 and 1937 respectively, have combined annual sales of just over 500 million pounds, putting the transaction on a multiple of 2.7 times revenue - at the high end of recent soft drinks deals, which have tended to be in the 1.5 to just over 2 times area.

Suntory bought the Orangina Schweppes drinks brand for more than $3 billion in 2009, giving it a significant presence in France and Spain. By acquiring a new business with a focus on Britain, Suntory said it expected to further increase sales.   Continued...

Lucozade and Ribena drinks bottles are displayed on a shelf in a shop in London April 24, 2013. REUTERS/Suzanne Plunkett