Japan’s Suntory closing in on deal to buy GSK drinks brands Lucozade and Ribena for more than $1.6 billion

September 6, 2013 Leave a comment

Suntory closing in on deal to buy GSK drinks brands: sources

8:58am EDT

By Anjuli Davies and Ben Hirschler

LONDON (Reuters) – Japan’s Suntory Beverage & Food (2587.T: Quote, Profile, Research, Stock Buzz) is in advanced talks to buy GlaxoSmithKline’s (GSK.L: Quote,Profile, Research, Stock Buzz) Lucozade and Ribena drinks for more than 1 billion pounds ($1.6 billion), in a deal that would pre-empt an auction of the brands, two people close to the process said. A deal could be announced in the next few days, one of the sources said on Thursday. GlaxoSmithKline (GSK) – Britain’s biggest drugmaker – announced plans in April to sell Lucozade and Ribena, which are big sellers in Britain but lack global reach, as the company seeks to make its consumer health business more focused.JP Morgan (JPM.N: Quote, Profile, Research, Stock Buzz) and Greenhill (GHL.N: Quote, Profile, Research,Stock Buzz) are acting for GSK on the disposal.

The sale had been expected to attract interest from drinks companies and private equity houses, although Suntory was early on seen as a likely front-runner given its desire to build up its European drinks business after buying Orangina Schweppes for more than 300 billion yen ($3.0 billion) in 2009.

Officials at GSK and Suntory declined to comment on the situation.

Lucozade and Ribena have annual sales of just over 500 million pounds a year and industry analysts have been expecting a buyer to pay around two times sales.

A decision to sell the businesses directly to Suntory, bypassing a formal auction, would be a blow for private equity houses and other possible trade buyers that had also been lining up potential bids.

The strong cash flows offered by the two soft drinks had been expected to attract private equity houses such as Blackstone (BX.N: Quote, Profile, Research, Stock Buzz), Lion Capital, Cinven CINV.UL, CVC Capital Partners CVC.UL and KKR (KKR.N: Quote, Profile, Research, Stock Buzz). All have declined to comment.

Lucozade and Ribena no longer fit well in GSK’s portfolio, since the company is focusing its consumer health operations increasingly on emerging markets, where both brands are relatively weak.

Both are veteran products – Lucozade was launched in 1927 and Ribena introduced 10 years later – yet they remain popular in Britain where they command a prominent position in retail outlets.

Ribena, in particular, is anchored firmly in its home market, both in terms of demand and supply. Around 90 percent of all the blackcurrants farmed in Britain and Ireland end up in the famous purple drink.

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