CORRECTED - CORRECTED-UPDATE 3-Japan Tobacco, Nissin to buy Katokichi in $1

Source from:  By Taiga Uranaka and Yuko Inoue TOKYO, Nov 22 (Reuters) 11/28/2007

Japan Tobacco Inc (2914.T: Quote, NEWS , Research) (JT) said on Thursday it and Nissin Food Products Co (2897.T: Quote, NEWS , Research) will buy frozen-food firm Katokichi Co (2873.T: Quote, NEWS , Research) in a $1 billion tender offer as JT seeks growth away from stagnating tobacco sales. The deal is the latest of a series by companies being hit by Japan's rapidly ageing population and a decline in their mainline products like cigarettes, cup noodles and beer in the home market, and are forced to look elsewhere for growth. Top Japanese brewer Kirin Holdings Co (2503.T: Quote, NEWS , Research) this month said it would buy Australian dairy and juice producer National Foods for $1 billion from Philippine partner San Miguel Corp (SMC.PS: Quote, Profile , Research). The deal would give JT and Nisshin greater access to Japan's growing frozen-food market. JT said the move is part of its strategy to seek growth from areas other than the domestic tobacco business. "With domestic volume on a decline for demographic factors, the global tobacco business is our growth driver. And the food business has been positioned as our next pillar," JT CEO Hiroshi Kimura told a joint news conference. "For the past years, we have been pursuing organic growth, but in the current mid-term business plan, we have said we would do M&As in the global tobacco and food businesses." The company's food business, which also includes soft drinks such as "Roots" canned coffee, and seasonings, came in at 152 billion yen ($1.4 billion) in sales for the first half, accounting for 5 percent of the firm's total sales. The former state monopoly still relies on domestic tobacco sales for nearly 60 percent of total revenue. Both the entire Japanese tobacco market and JT's domestic sales fell for the past eight straight fiscal years. JT, the world's third-largest cigarette maker, said it would offer 710 yen for each Katokichi share from Nov. 28 to Dec. 26, a premium of 19.5 percent over Wednesday's closing price of 594 yen. JT will spend 109.19 billion yen for all shares in Katokichi in the tender offer. Katokichi has hired Merrill Lynch as its financial adviser. JT, NISSIN ALLIANCE JT's Kimura said he has an "open mind" about an alliance with Nissin beyond frozen food, but added the two companies have no such plan at this moment. Also, Nissin Food CEO Koki Ando said JT will not acquire a stake in Nissin for the time being. "It's not going to happen anytime soon, though we may consider this in the long run," he said. Nissin, known for its "Cup Noodle," is 18.99 percent owned by U.S. investment fund Steel Partners, but Ando said his company has not received any suggestions from the fund about its business strategy. As of 0438 GMT, JT shares fell 1.2 percent to 632,000 yen and Nissin rose 2.7 percent to 4,110 yen. Katokichi shares were untraded with a glut of buy orders at 694 yen, up 17 percent from Wednesday's close. Since acquiring Gallaher Group in the biggest purchase of a foreign company by a Japanese firm, JT has said it is open to buying more firms. After the acquisition, JT, 50 percent owned by the Japanese government, said it planned to sell 49 percent of Katokichi shares to Nissin Food. The two firms will consolidate their frozen-food business in April 2008, creating Japan's biggest frozen-food company with sales of 260 billion yen, JT said. Enditem