Bottom Line: Suntory pays high price for global plans

 
Elizabeth Fournier

PUMPED up on sugary soft drinks, it didn’t take the Glaxo and Suntory execs long to seal a deal. Though everyone from AG Barr to private equity houses Blackstone to Permira was touted as a potential buyer, the Japanese group emerged as the front runner early on and stood its ground.

Yesterday’s price – well above the mooted £1bn tag put on the brands throughout the sale process – implies it may have played its hand too soon.

Suntory clearly has huge global aspirations. By paying £2.3bn for Orangina in 2009 it gained exposure to continental Europe and upped its percentage of total revenues from overseas sales to 20 per cent from 12 per cent. Yesterday it upped that by another £500m a year and took a step into the UK – a crucial area for growth when its home market of Japan has seen demand hit by a declining population.

Of course all of this is good news for vendor GlaxoSmithKline. The shares may not have reacted yesterday – this deal was priced in – but they have been rising steadily since Sir Andrew Witty announced the strategic review in April that led to yesterday’s deal, adding 23 per cent since the start of the year.

Glaxo is refocusing the business on its core healthcare products and looking to emerging markets for growth instead of trying to flog Ribena and Lucozade to the saturated US market.

The £1.35bn windfall it secured from Suntory won’t make a huge amount of difference to a balance sheet the size of Glaxo’s, but proves that Sir Andrew is feeling optimistic about the firm’s pipeline of potential blockbusters, including experimental lung drug Anoro Ellipta, currently waiting on FDA approval. Investors should cheer his confidence.

ADVISERS

SEAMUS MOORHEAD
GREENHILL


Greenhill, led by managing director and consumer expert Seamus Moorhead, advised GlaxoSmithKline (GSK) on the sale of Ribena and Lucozade to Suntory, alongside investment bank JP Morgan and law firms Allen & Overy (A&O) and Clifford Chance.

The boutique investment bank has worked with GSK before, advising the pharmaceuticals business on its acquisition of protein drinks firm Maxinutrition for £162m in 2011.

Moorhead joined Greenhill in 2009 but has worked in the consumer sector for more than

20 years, with most of that time spent at Swiss bank UBS. Recent deals include advising Robert Wiseman Dairies on the sale of its business to German group Muller in 2012.

Meanwhile JP Morgan’s team, which acted as the lead adviser to GSK, included Hernan Cristerna, co-head of mergers and acquisitions, Andrea Ponti, vice chairman of its healthcare division and managing directors Rakesh Patel and Murray Orr. JP Morgan has been busy of late, securing some of the biggest deals in the telecoms sector this year. It acted as sole advisor to Nokia on the sale of its devices and services division to Microsoft for £4.5bn last week and is also involved Verizon Communications’ buyout of Vodafone's

45 per cent stake in the companies’ wireless joint venture. Last year the bank work on one of the food industry’s biggest acquisitions – 3G Capital and Berkshire Hathaway’s £18bn takeover of Heinz.

A&O and Clifford Chance bagged the leading legal roles. A&O’s team was headed up by corporate partner Edward Barnett and global corporate co-head Andrew Ballheimer while Clifford Chance tasked finance partner Joel Ziff.

Morgan Stanley acted for Suntory on the deal.