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Business

Shrinking home market behind Mizkan's grab for Ragu

NAGOYA -- By purchasing pasta sauce operations from Anglo-Dutch concern Unilever, Mizkan Holdings aims to make a foreign end run around the limited growth potential of a Japan whose population is declining.

     The Japanese condiment maker said Thursday that it will spend $2.15 billion on the deal -- far more than the 164.2 billion yen ($1.6 billion) in sales it generated last fiscal year.

     Mizkan will purchase the Ragu and Bertolli sauce brands as well as two U.S. production sites. The brands have a combined 33% share of the North American consumer market for pasta sauce, which is estimated at $2.3 billion, according to the company.

     While Mizkan's overseas sales jumped 66% in the year ended Feb. 28, its domestic sales grew just 1%. But Japan, at 107.6 billion yen, accounted for the bulk of the overall tally.

     "We will disperse management resources" to the world, Chairman and Chief Executive Officer Kazuhide Nakano told a news conference.

     "Unless we are the No. 1 or No. 2 brand, it's difficult to survive" in the global food industry, where many companies are consolidating, Nakano said.

     The company will finance the purchase with short-term borrowings from Bank of Tokyo-Mitsubishi UFJ and three other lenders. After repaying a portion using cash reserves, it will then turn these into long-term loans.

     The unlisted Mizkan does not disclose its finances but appears to have been effectively debt-free. Based in the Aichi Prefecture city of Handa, the 210-year-old company commands a high market share in Japan.

(Nikkei)

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