Meiji Dairies Corp., Japan's biggest dairy company, and confectioner Meiji Seika Kaisha Ltd. said Thursday they will merge, creating the nation's second-biggest food maker as prices of ingredients rise.
The food makers will merge under a holding structure April 1, they said. Both companies will have approximately the same number of shares in the merged entity, according to Bloomberg calculations.
The combination of the Tokyo-based companies, with total sales in excess of ¥1.1 trillion last year, would create the nation's largest food maker after Ajinomoto Co.
The merger could help increase buying power for ingredients such as cocoa and wheat, which both hit records this year.
"Together the companies would be able to buy raw materials together and boost price negotiation power," Morio Oshima, an analyst at Mizuho Investors Securities Co., said before the announcement. "It could help profit margins."
Meiji Seika President Naotada Sato will be president of the combined company and Meiji Dairies President Shigetaro Asano will be vice president.
Investors in Meiji Seika will receive 0.1 share in the holding company for each of their shares, while stockholders of Meiji Dairies will get 0.117 share, the statement said.
Meiji Seika, with brands including Almond chocolates, Xylish chewing gum and Hello Panda sweets, had revenue of ¥405 billion last year. About 30 percent of its revenue comes from its pharmaceuticals business that produces the antidepressant Depromel and antibiotic Omegacin. Meiji Dairies, with sales of ¥707 billion last year, makes Meiji-brand milk and yogurt as well as frozen pizzas and baby food.
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