Mayu Sakota, Rocky Swift
TOKYO (Reuters) – Kirin Holdings Co's new president said he has secured enough shares to buy supplement maker Fancl Co, a move that would help the brewer overcome a rival takeover bid by an overseas fund and boost the company's expansion into healthcare.
Takeshi Minamoto, who became the company's chief executive in March, said he wanted to declare victory when Kirin's tender offer was due to close on Wednesday but financial regulations forced it to be postponed until Sept. 11 after Hong Kong-based MY.Alpha Management raised its stake in Fancl to about 10 percent.
“We are confident,” Minakata told Reuters on Wednesday. “It's a bit disappointing that investors have to wait another 10 days, but our position hasn't changed and the amount hasn't changed. We believe that Kirin Group is the best partner for FANCL.”
As of Thursday, Fancl's market capitalization was 364.1 billion yen ($2.52 billion).
Minakata, who previously led Kirin's pharmaceutical subsidiary, vitamin maker Blackmores, which Kirin bought for $1.2 billion in 2023, joins the company to signal a determination to pivot away from its alcohol business, which is facing a shrinking market in Japan and changing consumer tastes overseas.
Kirin launched a 220 billion yen ($1.5 billion) tender offer in June for the roughly 70% of Fancl shares it did not already own. Kirin has since extended the offer period and increased its offer price on the back of continued share purchases by MY.Alpha.
MY.Alpha, which ran York Capital Management Global Advisors' Asia hedge fund business, did not respond to a request for comment on its investment strategy for Fancl.
FANCL, known for its skin cleansing oils and nutritional additives, fits into Kirin's health science portfolio, which it aims to develop into a new pillar of the group alongside alcoholic beverages and pharmaceuticals. The company aims to expand annual sales from the business to 500 billion yen, about five times higher than last year.
But getting there will likely require more than organic growth and further overseas acquisitions, Minakata said.
“Obviously, we're looking at companies that have some degree of unique technology, products and brand,” he said. “In that sense, North America remains a big, growing market. I think it has great potential.”
Minakata joined Kirin in 1984, two years after the company first made inroads into pharmaceuticals, leveraging its fermentation know-how. He acknowledged that it may take time for consumers, especially overseas, to associate the Kirin brand with medicines and health foods rather than alcohol.
The timing of the move into supplements is hardly ideal, given widespread concern among consumers following Kobayashi Pharmaceutical's tainted red yeast product scandal, which was linked to dozens of deaths in Japan this year.
The scandal has led to the resignation of two top executives at the 105-year-old company, a plunge in its shares and calls for greater scrutiny of so-called functional foods that make health claims.
Minakata said Kirin has sufficient quality control measures in place to mitigate the risks of branching out into products with a short scientific track record, such as supplements.
“We have processes in place to ensure that we have the same level of confidence in every product, regardless of how long it has been in development,” he said.
Kirin faces stiff competition in the domestic market for its traditional beer and soft drinks business from Asahi Group Holdings Ltd., Suntory Holdings Ltd. and Sapporo Holdings Ltd. Analysts have long said the industry is ripe for consolidation.
A foreign takeover became even more likely last week after Japanese retail giant Seven & i Holdings Co. received a surprise takeover bid from Canada's Alimentacion Couche-Tard SA. Minakata said Kirin would have to consider any serious proposals it received.
“We need to remember that it's not impossible,” he said. “We need to demonstrate that each of our three major businesses sees value in their own unique way, and we need to do that more effectively.”
(1 dollar = 144.4300 yen)
(1 dollar = 144.5400 yen)
(Reporting by Rocky Swift; Editing by Stephen Coates and Miral Fahmy)
