LONDON/TOKYO - Japan's Suntory Beverage & Food Ltd is to buy GlaxoSmithKline Plc's Lucozade and Ribena brands for 1.35 billion pounds (US$2.11 billion or S$2.6 billion) to help it expand into new markets.
The acquisition, announced by the companies on Monday, had been widely anticipated since people close to the process said last week that Suntory was in advanced talks on a deal that would pre-empt an auction of the iconic British drinks.
Japan's second-largest drinks maker has plenty of cash after an initial public offering in June that raised $4 billion. It was always seen as the most likely buyer for the brands after GSK announced plans in April for their disposal.
Lucozade and Ribena are well-loved in Britain but lack global reach, especially in the big emerging markets that are becoming the focus of the British drugmaker's consumer health business.
For Suntory, however, they offer a growth opportunity to counter sluggish demand at home.
Suntory bought the Orangina Schweppes drinks brand for more than $3 billion in 2009, giving it a significant presence in France and Spain. By acquiring a new business with a focus on Britain, Suntory said it expected to further grow sales.
The purchase also allows the Japanese group to extend its reach into countries where GSK already operates, such as Nigeria and Malaysia.
Despite being on the market for around 80 years, Lucozade and Ribena have combined annual sales of just over 500 million pounds a year. That puts the transaction on a multiple of 2.7 times revenue - at the high end of recent soft drinks deals.
Suntory, which is better known for its beer and Yamazaki whisky, said the deal would have a limited effect on 2013 results and it was "currently examining the effect it will have on the performance outlook for the following business year and onward".
The sale is expected to be completed by the end of the year, subject to regulatory approvals.
For GSK, it will yield net proceeds of around 1.3 billion pounds - after tax, fees and costs - that will be used to reduce debt and for general corporate purposes. The net gain will be excluded from 2013 core operating profit and earnings per share.
A GSK spokesman said Suntory's bid was also attractive because it would protect jobs in Britain. Some 700 employees will transfer to the Japanese group, including around 500 workers at GSK's Coleford factory in the west of England.
The GSK spokesman said there was expected to be very little, if any, impact on jobs as a result of the sale.
Other potential buyers that had been eyeing Lucozade and Ribena included Blackstone, Lion Capital, Cinven, CVC Capital Partners and KKR. Many had prepared bids for an auction that never happened.
JP Morgan and Greenhill acted for GSK on the disposal.