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Japan's Kirin opposes $5.4bn share buyback proposal from activist

UK-based IFP had demanded that brewer focus on core beer business

Yoshinori Isozaki, Kirin's president, speaks at press conference on Friday (Photo by Yoshinaru Sakabe).

TOKYO -- Japanese beverage group Kirin Holdings is opposing a proposal by an activist investor that it buy treasury shares worth 600 billion yen ($5.46 billion), the company announced on Friday.

According to a statement from the Japanese company, London-based Independent Franchise Partners is demanding that the brewer choose unaffiliated directors it has suggested and provide more incentives for directors, in addition to buying treasury stocks.

The activist group has asked the brewer to concentrate on its core beer business and to sell its non-beer businesses such as health food production and medical.

At an earnings conference on Friday, Yoshinori Isozaki, Kirin's president, highlighted Japan's domestic issues of a declining birthrate and aging population, as well as trends among young people to avoid alcohol and a risk that the World Health Organization's will introduce regulation on alcohol. Against this backdrop, "it is impossible to achieve sustainable growth if we only focusing on the beer business," he said.

The brewer has been accelerating expansion in its non-beer businesses.

In 2019, the company acquired a biochemicals business from Kyowa Hakko Bio and bought a share of about 33% in Japanese cosmetic and health supplement maker Fancl.

"The stock price declines coincided with the acquisition of Kyowa Hakko Bio ... in February 2019 and 33% stake of Fancl ... in August 2019 for an aggregate of more than 250 billion yen," said IFP in its appeal to Kirin.

The activist, which reportedly owns 2% of the brewer, insists that Kirin is "discounted by more than 50% ... This discount is a clear conglomerate discount for the accumulation of unrelated businesses that lack synergy."

Kirin plans to explain the synergies with the Fancl business at a media and analyst briefing in March.

Isozaki said his company "has not yet announced exactly how much synergy it will have" with Fancl, adding that it was very important to do so and to get shareholders to understand.

IFP has also asked the Japanese company to choose unaffiliated directors that it has suggested. However Isozaki said that the latest board line-up included medical or health science professionals, women and foreign executives. "So, I think we can get through with the current board members."

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