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Kirin Holdings Acquires Blackmores in a $1.24B Cash Deal

Kirin Holdings Co., Japan's second-largest brewer, has made a significant move into the health products sector by agreeing to acquire Australian vitamin maker Blackmores Ltd. for AU$1.88 billion (USD$1.24 billion) in cash. This acquisition marks Kirin's strategic effort to reduce its reliance on beer and diversify its portfolio. The deal, confirmed on April 27, has received strong approval from Blackmores' board, with Kirin offering AU$95 per share and an additional A$3.34 special dividend to shareholders. Altogether, the bid adds up to a 24% premium to the company's last closing price. The Australian (BKL) company's shares surged 22% in early Sydney trading the next morning.

Although craft beer sales volumes have consistently grown by double-digit percentages, amounting to $454 million in annual revenue for Kirin, the conglomerate now aims to expand its presence in the health products market through the acquisition of Blackmores. Kirin is venturing into the healthcare sector due to the growing regulations in the alcoholic beverage industry. This move highlights Kirin's departure from its core beer business, setting it apart from larger competitors like Anheuser-Busch InBev SA and Asahi Group Holdings Ltd., who are focusing on strengthening their alcohol-related ventures and investing in upscale enterprises like craft beers. With its strong foothold in the craft beer industry, Kirin recognizes the need to diversify its business and capitalize on the growing demand for health and wellness products. Blackmore reported USD 650 million in sales for 2022 and an EPS of 1.58. The acquisition of Blackmores will allow Kirin to tap into the company's extensive distribution network and reach millions of consumers in the Asia-Pacific region.

Kirin also considers health consumer products to be less sensitive to worsened macroeconomic conditions. In Japan, due to rising energy costs and a weaker yen, Kirin raised canned beer prices in October 2022 for the first time since 2008. They have also increased prices on imported wines and spirits. If the Ukraine crisis continues to impact costs, Kirin may need to raise prices again next year.

Kirin Holdings' USD$1.24 billion cash acquisition of Blackmores represents a strategic move to diversify its business and reduce its reliance on the beer industry. The company aims to expand its presence in the health products sector and leverage Blackmores' extensive distribution network in the Asia-Pacific region. Kirin's success in the North American craft beer market has laid a strong foundation for future growth. By combining its expertise in craft beer with its foray into health products, Kirin is positioning itself for continued success and long-term sustainability in an evolving market.

Written by: Ignacio Paz

Sources: ESM, Stockhead, Nutra Ingredients, Market Screener

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