Coca-Cola Amatil has called off its $A7 billion takeover talks with Lion Nathan, saying its US-based parent has rejected the proposal.
Coca-Cola Company, which owns a 30% stake in Australia-based Coca-Cola Amatil (CCA), has written to Lion Nathan’s major shareholder, Japan’s Kirin Holdings, calling off discussions, CCA says in a statement.
During a visit to Dusky Sound in Fiordland I found the creek from which Captain James Cook’s crew drew the water for the first beer made in New Zealand shortly after the Resolution sailed into the sound early in 1773.
Cook had 7300 litres of that aboard on his first voyage. He took a supply of the leaves away with him from Dusky Sound to make spruce beer during the rest of his voyage.
His beer was thus not only the first in New Zealand but the first to be exported.
The price war for packaged beer has become so intense that between them, brewers and supermarkets missed out on a whopping $66 million in the past year, DB Breweries says.
The two big brewing companies DB and Lion are now planning price rises this year of five percent and up to 10 per cent respectively.
Despite significant inflationary pressures, primarily raw material costs and wages, the price of supermarket stocked beer has stayed stagnant for well over a decade, with DB’s promotional price range for mainstream beer the same today as it was 15 years ago.
In theory, a brewer needs to increase its price by a percentage that recovers input cost increases and protects existing margins, but at present input costs are rising much quicker than selling price increases.
Mr Blake estimates that raw material costs for malt, sugar, glass and aluminum have risen between 10 percent and 70 percent in the past year alone, while rival Lion has pencilled in a seven percent cost increase for 2009.
DB’s beer prices went up by 5.5 percent in July, partly due to the annual excise tax increase, although many supermarkets absorbed the rise.
Australian drinks company Coca-Cola Amatil is seeking permission from the Commerce Commission to acquire cordial maker Baker Hall.
The New Zealand unit of Coca-Cola Amatil wants to buy the bottling production line, brands and business assets of Baker Hall from Old Fashioned Foods Ltd.
Lion has 52 percent of the New Zealand beer market while Coca-Cola Amatil has 53 percent of the New Zealand non-alcoholic ready-to-drink market and 75 percent of the carbonated soft drink market.
Despite worsening economic conditions the domestic beer market grew 0.3 percent for the year to September 30, with Kiwis consuming more than 171 million litres of Lion-produced favourites such as Lion Red, Speight’s and Steinlager.
Beer operations increased earnings before tax and interest by 10.8 percent, buoyed predominantly by recent entrants to the market – among them Steinlager Pure, which increased volume by more than 300 percent for the year.
DB Breweries says the price of packaged beer will “inevitably” go up by as much as 5 per cent from March 1 next year due to spiralling costs.
Liquor is living up to its reputation as recession-proof for both brewers. Lion’s New Zealand managing director Peter Kean said the performance of premium brands was still strong.
“I don’t think it’s drinking to forget, it’s more a case of not giving up all your luxuries or all your treats.”
Alcoholic drinks maker Lion Nathan says its proposed $8 billion takeover of Coca-Cola Amatil would yield as much as $130 million in annual savings. The soft-drinks maker, though, has given the scheme of arrangement a cool response.
To finance the $4.5 billion cash component of the bid, Lion Nathan will place 327 million new shares with its major shareholder, Japanese food and beverages giant Kirin Holdings at a price of $11.50 per share. It will also take on $800 million in debt.
The company sought to allay concerns over the influence wielded by Kirin, whose stake would increase to 47.5%, from 46.1%, after the issue of the new shares.
Lion Nathan Ltd., Australia’s second- largest brewer, offered to buy Coca-Cola Amatil Ltd. for A$7.6 billion ($4.9 billion) in cash and stock to create a company selling everything from beer to soda, juice and wine.
Lion Nathan Ltd. and Coca-Cola Amatil Ltd. have been in merger talks the past six months that might create an A$11 billion ($7.1 billion) beverages company covering everything from beer to water, juice and soft drink, the Australian Financial Review reported.
The talks also include Lion Nathan’s majority stakeholder Kirin Holdings Co Ltd. and The Coca-Cola Company, the newspaper reported, citing people it didn’t name. Macquarie Capital Advisers is working with Coca-Cola Amatil while Caliburn Partnership is advising Lion Nathan, the Review said.
There has been speculation over Lion Nathan’s ownership of Liquor King and Super Liquor since Foodstuffs clinched the Liquorland deal last week.
However, Lion Nathan’s New Zealand head of corporate affairs Liz Read says there are no sale plans in the works, and no one has made an offer for Liquor King or Super Liquor.