Coca-Cola Amatil (CCA) Chief Executive Terry Davis has said the price offered to Lion Nathan shareholders solidifies their view that last year’s offer by Lion undervalued their worth.The offer for the remaining Lion Nathan shares made by Kirin at the start of the week represented a price to earnings ratio of around 13.8, comfortably above the 10.5 offered for CCA by Lion in a bid backed by Kirin last November.

“What has happened is that the very high multiples paid for Lion Nathan validates the board’s, and Coca Cola’s, decision that the offer was unsatisfactory,” Mr Davis told reporters in Sydney after a speech to the Committee for Economic Development of Australia yesterday.

“Asahi, Suntory and Kirin have all paid very high multiples for the businesses they’ve bought and we’ll just have to see what changes they’ll make.”

He queried the ability of Japanese companies to extract value from their recent beverage purchases in Australia, but understood their motives.

“In Japan they’re faced with a declining domestic economy and Australia is a wonderful place to invest money in,” he noted. “(But) are we seeing a return of the (80s) when Japanese bought up real estate in Honolulu and lost a fortune?”

Lion Nathan shareholder approval for the $3.3 billion offer by Kirin for the 54% of the company they don’t own is still pending, but if it goes through it would be the third purchase by Kirin in Australia in recent times. In 2007, they purchased National Foods and last year they acquired Dairy Farmers, as they plan to diversify their business and double revenues reaped outside Japan by 2015.

Other Japanese companies have been embarking on similar strategies, with brewer Asahi completing a purchase of Schweppes Australia last month and Suntory acquiring New Zealand’s Frucor, maker of the V energy drink.

Mr Davis said Amatil management were keen to avoid getting involved in bidding wars. “Back in 2005, we actually took a strategic decision to not compete against private equity and other trade buyers for high-priced food and beverage assets as the only way to achieve growth,” he said.

Australia’s largest soft drinks maker has experienced a strong start to the year with assistance from warm summer weather and the stimulus package, but Mr Davis was unsure how their results would compare to last year’s record figures.
“I can’t tell you yet whether 2009 will be as strong as 2008, but I do fully expect that we will again be in a strong market position in both non-alcoholic beverages and alcoholic beverages,” he advised.

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