Kirin Looks to Boost Revenues, Set to Acquire Kyowa Hakko

With the sale of beer dropping, Japan’s biggest beer manufacturer, Kirin Holdings Co., acknowledged it was in talks to buy Japanese drug manufacturer Kyowa Hakko Kogyo Co. A spokesman for Kirin confirmed the news of the sale, which had already been reported in Nikkei, the Japanese newspaper.

For Kirin, the strategy obviously is to boost its revenues, which had dropped as beer production plunged during the first half of the year, with the revenues that Kyowa Hakko generated by manufacturing drugs to counter allergies and fight cancer. With this new acquisition, industry watchers have predicted profits at Kirin would be almost twice that generated during the first half of the year.

Analysts see this purchase as good business strategy. Shunichiro Manome, an equities analyst in Tokyo-based Cosmo Securities Co., it made good business sense for Kirin to shore up its drugs and biotechnology interests and use the revenues generated from these areas to boost its profits, especially considering the minimal growth in the Japanese beer market.

According to the Nikkei report, Kirin was looking to pick up a stake of more than 50 percent in Kyowa Hakko. After the deal, Kyowa Hakko would become part of the drug manufacturing unit that Kirin owns. The Nikkei, however, did not divulge the source of its information. It said assuming a 30 percent premium, the deal would cost Kirin about 300 billion yen.

Kirin’s biotechnology and drugs division currently manufactures Espo and Nesp, both drugs for anemia. The company had recorded 67.2 billion yen worth of sales from its pharmaceuticals sector last year.

Kyowa Hakko manufactures Allelock, a drug used for allergies. It recorded sales worth 131.5 billion yen last year. That number alone accounted for about 37 percent of the company’s business last year. The company derived the remainder of the revenue from food products and chemicals. It also has exclusive rights over Potelligent, which is a process that enhances the impact of immune disorder drugs.

The announcement of the sale pushed prices of Kirin stock through the roof to a seven-year high. It also ensured the value of Kirin, a company based out of Tokyo, went up to 560 billion yen or $4.9 billion, a 17 percent jump. On the Tokyo Stock Exchange, Kyowa Hakko stock also saw a 200 yen hike to 1,402 yen.