Japan Tobacco, Instant Noodle Pioneer Team up

Source from:  malaysia.news.yahoo.com TOKYO (AFP) 11/23/2007

Japan Tobacco and instant noodle pioneer Nissin said Thursday they would jointly operate a frozen food company in a billion-dollar buyout and may enter a capital tie-up in the future. Japan Tobacco Inc., striving to diversify as smoking declines, will launch a 109.2-billion-yen (one-billion-dollar) friendly bid to acquire all shares in frozen food manufacturer Katokichi Co. Ltd. Nissin Food Products Co. Ltd., which started a global craze when it invented instant ramen noodles five decades ago, will in turn buy 49 percent of Katokichi shares from Japan Tobacco and jointly operate the frozen food maker. The two companies will then transfer their own frozen food businesses to Katokichi by April 2008, which would make it Japan's biggest frozen food manufacturer with annual sales of 260 billion yen. "The food industry now faces major challenges due to the falling birthrate and rising prices of grain and vegetable oils," Nissin Food president Koki Ando told a press conference with Japan Tobacco (JT) and Katokichi. The partners did not rule out strengthening their alliance in the future. "JT and Nissin are also discussing the possibility of entering a cross-shareholding deal," Ando said. "Such an arrangement will not happen immediately, but it is better if we consider it in the future." The consolidation with Katokichi will boost JT's annual food sales to over 600 billion yen, bigger than major food processing firms such as soy sauce maker Kikkoman Corp. which has sales of some 390 billion yen. "The latest move forms part of our mid-term business plan calling for the use of mergers and acquisitions in enhancing the food business," JT president Hiroshi Kimura said. "The food business has been an integral part of our company and will continue be a key pillar," he said. Japan Tobacco has been looking for ways to expand as Japan's population is rapidly ageing and smoking less. It recently bought British rival Gallaher for 2.25 trillion yen in the biggest-ever foreign acquisition by a Japanese firm. Japan Tobacco posted revenue of 286.5 billion yen from its food business in the last fiscal year to March 2007, which accounted for just six percent of its annual sales. Katokichi, a major frozen food maker established in 1956 and based in southwestern province of Kagawa, has been struggling to recover from one of Japan's growing number of food safety scandals Katokichi earlier this year admitted to having engaged in improper accounting. A subsidiary has also been found to have mislabelled some frozen food. The company expects a 38 percent drop in revenue in the fiscal year to March 2008. Japan Tobacco is offering 710 yen each for 153,789,431 Katokichi shares -- excluding the five percent stake it already holds in the food maker and a 1.3 percent stake held by Katokichi itself. The price, a 20 percent premium to Katokichi's Wednesday closing price and 34.7 percent to the average closing price over the past month, makes the buyout worth a maximum 109.2 billion yen. Katokichi has agreed to the deal. JT plans to start the purchase next Wednesday for completion by December 26. Enditem