“Whilst unconfirmed at this stage, it is thought that proceeds could be used to fund international acquisitions,” wrote Damian McNeela from Panmure Gordon in a note yesterday.
Mulling over the rationale for such a UK move on Suntory’s part (if indeed it did launch shares onto the stock market in H2 2013) the analyst added that the company was already a Pepsi bottler (while Britvic bottles the brand in Great Britain), and also licenses citrus-based soft drink Orangina to AG Barr.
Japanese may fancy something stronger
McNeela added that Suntory already had a presence in Europe, but a limited UK presence, and “as such it is, in our view, reasonable to assume that Suntory may wish to enter the UK market”.
“If Suntory were to consider a move into the UK then we would expect its interest to fall on the enlarged Barr Britvic Soft Drinks Company (BBSD),” McNeela said.
Recent transaction multiples averaging circa. 10.5x EV/EBITDA* (given selected large soft drink deals since 2007) indicated a potential further upside of circa. 22% for the enlarged group, the analyst said, before stressing that any move by Suntory nonetheless retained a “high degree of uncertainty”.
Urging caution, McNeela said that it was now unclear what Suntory wished to achieve via acquisitions, and may prefer alcoholic- to soft drinks producers, and emerging market growth brands.
That Pepsi connection…
Speaking to BeverageDaily.com this morning, McNeela said he was not well-placed to comment on rumors that Suntory could instead team-up with Diageo in a blockbuster move for Beam Inc.
“However, should the UK be a market it wishes to enter then of the two possible targets in the UK, we believe that the enlarged BBSD company would be its preference rather than [UK soft drinks rival] Nichols,” he wrote in the note.
“Suntory is already the Pepsi Bottler for Japan and has recently entered into a joint venture with Pepsi in Vietnam,” McNeela said.
“As such, the acquisition of BBSD could provide a platform for further consolidation of Pepsi’s bottling operations.”
McNeela reminded investors that Suntory bought Orangina Schweppes in 2009 for ₤2.6bn ($4.19bn), and said the firm could also benefit from the global growth of brands such as (current Britvic star) Fruit Shoot if it did move for BBSD.
*Enterprise Value/Earnings Before Interest, Tax, Depreciation and Amortization.