Japan's Asahi defies Brexit blues with Fuller's beer buy

By Martinne Geller and Noor Zainab Hussain

(Reuters) - Japanese brewer Asahi Group is buying the British beer business of Fuller, Smith & Turner for 250 million pounds ($327 million), including debt, furthering its overseas reach at a time of growing uncertainty over Brexit.

The acquisition announced on Friday will increase Asahi's presence in Britain with the addition of London Pride ale, Frontier lager and Cornish Orchards cider to a range including Asahi Super Dry, Peroni Nastro Azzurro and Meantime.

Fuller's shares jumped 21 percent to 1100 pence, their highest level in 19 months after Asahi's move, which comes shortly after Japanese Prime Minister Shinzo Abe voiced concerns over the risk of a disorderly British exit from the European Union in March and its impact on business.

Japanese firms have spent more than 46 billion pounds ($59 billion) in Britain, encouraged by successive British governments since Margaret Thatcher promising them a business-friendly base from which to trade across Europe.

Asahi plans to continue operations at the Griffin Brewery in Chiswick, London, where beer has been made since 1654, while a long-term supply agreement and strategic alliance between the firms will allow Fuller's pubs to continue to sell its beer.

"This transaction is unexpected but a welcome one - realising a significant value for shareholders and exiting a challenging beer market," Liberum analyst Anna Barnfather said.

Barnfather said her target price of 1050 pence for Fuller's had valued the brewery division at around 125 million pounds.

Fuller's said the disposal will enable it to focus on its pubs and hotels, which generate 87 percent of its operating profits. It will also provide capital for Fullers to invest there, both organically and through future acquisitions.

ACROSS THE WORLD

Asahi said the addition of the new brands strengthened its position as a leader in premium beer, and that it would use its global footprint to build them across the world.

The global beer market, dominated by big players such as Anheuser-Busch InBev and Heineken, has been challenged lately by the rise of independent craft brews and shifting consumer tastes favouring wine and spirits.

"Having carefully considered its options for the beer business and Fuller's existing relationship with Asahi, the board believes that Asahi is the ideal owner," Fuller's said.

The sale price represents a multiple of 23.6 times core earnings of 10.6 million pounds for the year ended March and Fuller's said it would return between 55 million pounds and 69 million pounds of the proceeds to its investors.

The deal is expected to close in the first half of 2019.

Rothschild & Co is acting as sponsor and sole financial advisor to Fuller on the proposed sale.

($1 = 0.7642 pounds)

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Anil D'Silva and Alexander Smith)