TOKYO -- Asahi Group Holdings will unload soft drink unit LB after the business, acquired over a decade ago, failed to generate the expected synergies.
The Tokyo-based company seeks to use the proceeds from the sale to pay down debt stemming from large acquisitions in recent years and to invest more in Europe and Asia, regions where it lacks a strong presence.
The bidding process has already begun, and nonfinancial companies and investment funds are showing interest. The business is expected to fetch as much as 20 billion yen ($175 million).
The sale aligns with the company's efforts to shed by next March noncore businesses and other operations where it does not own a controlling interest.
LB, which sells its products mainly at convenience stores, generated 21.8 billion yen in sales in 2016. Asahi bought it in 2005 from Kanebo, which was undergoing a government-supported rehabilitation at the time.
In view of growing demand for chilled beverages, which are kept refrigerated all the way from the production plant to stores and restaurants, Asahi sought to capitalize on LB's strength in that area.
Constantly chilled beverages undergo a lesser degree of pasteurization than other types of soft drinks and thus retain a fresher flavor. Their affordable prices also have won them many fans.
Asahi has achieved a high level of profitability in the chilled beverage segment by releasing products under its own Calpis probiotics brand, some of which are handled by LB.
Over the past two years, Asahi has spent hefty sums on beer acquisitions. It bought the Western and Eastern European operations of global leader Anheuser-Busch InBev of Belgium for 1.2 trillion yen. It has also stepped up exports of its signature Asahi Super Dry beer to South Korea. The company seeks to turn European and Asian operations into growth engines.
To free up money to fund growth in these markets, Asahi has been actively unloading assets of late. In June, the company announced the sale of its stake in Chinese beverage company Tingyi-Asahi Beverages Holding to joint venture partner Tingyi (Cayman Islands) Holding for $612 million. Earlier this month, Asahi announced the potential sale of its stakes in an Indonesian joint venture and in Tsingtao Brewery of China.
Many beer companies in Japan have ramped up acquisitions at home and abroad since the 2000s. With synergies from these acquisitions fading, they are now trying to chart a way to future growth.