Kirin Holdings Co. President and Chief Operating Officer Takeshi Minakata speaks to Reuters in an interview at the company's headquarters in Tokyo on August 28, 2024. REUTERS/Kato Kazunari
(1/2)Kirin Holdings Co. President and Chief Operating Officer Takeshi Minakata poses for a photo during an interview with Reuters at its headquarters in Tokyo on Aug. 28, 2024. REUTERS/Issei Kato License rights purchased, opens in new tab TOKYO, Aug 29 (Reuters) – Kirin Holdings Co. (2503.T) has secured enough shares to buy supplement maker FANCL Co. (4921.T), its new president said, helping it overcome a rival takeover by an overseas fund and further the beer maker's shift 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 isn't ideal, given widespread consumer concern following Kobayashi Pharmaceutical's (4967.T) red yeast bacteria contamination that was linked to dozens of deaths in Japan this year. The scandal led to the resignation of two top executives at the 105-year-old company, a sharp drop in its share price 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 is facing stiff competition in the domestic market for its traditional beer and soft drinks business against Asahi Group Holdings Co. Ltd. (2502.T), Suntory Holdings Co. Ltd. (RIC:RIC:SUNTH.UL) and Sapporo Holdings Co. Ltd. (2501.T). Analysts have long said it is time for consolidation in this area. And now, with Japanese retail giant Seven & i Holdings Co. Ltd. (3382.T) receiving a surprise takeover bid from Canada's Alimentation Couche-Tard SA (ATD.TO) last week, a foreign takeover becomes even more likely. Minakata said Kirin would have to consider any serious takeover bids it receives.
“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)
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Reporting by Rocky Swift; Editing by Stephen Coates and Miral Fahmy
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