Suntory closing in on deal to buy GSK drinks brands

Japan's Suntory Beverage & Food is in advanced talks to buy GlaxoSmithKline's Lucozade and Ribena drinks for more than £1 billion, in a deal that would pre-empt an auction of the brands, two people close to the process said.

A deal is very likely be announced in the next few days, one of the sources said yesterday.

GlaxoSmithKline (GSK) – Britain’s biggest drugmaker – announced plans in April to sell Lucozade and Ribena, which are big sellers in Britain but lack global reach, as the company seeks to make its consumer health business more focused.

JP Morgan and Greenhill are acting for GSK on the disposal. The sale had been expected to attract interest from drinks companies and private equity houses, although Suntory was early on seen as a likely front-runner given its desire to build up its European drinks business after buying Orangina Schweppes for $3.0 billion in 2009.

Officials at GSK and Suntory declined to comment on the situation.

Lucozade and Ribena have annual sales of just over £500 million a year and industry analysts have been expecting a buyer to pay about two times sales.

A decision to sell the businesses directly to Suntory, bypassing a formal auction, would be a blow for private equity houses and other possible trade buyers that had also been lining up potential bids.

The strong cash flows offered by the two soft drinks had been expected to attract private equity houses such as Blackstone, Lion Capital, Cinven, CVC Capital Partners and KKR. All have declined to comment.

Ribena, in particular, is anchored firmly in its home market, both in terms of demand and supply.

About 90 per cent of all the blackcurrants farmed in Britain and Ireland end up in the famous purple drink. – (Reuters)