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Japan’s Ajinomoto Hunts for More Overseas Deals

August 20, 2015
Food & Drink
Japanese food maker Ajinomoto Co. could spend another $1.2 billion on overseas acquisitions as it seeks to join the ranks of global giants, the company’s new president said.
 
“For M&A funding, we can tolerate our debt-to-equity ratio rising temporarily to as high as 50%,” Takaaki Nishii told The Wall Street Journal in an exclusive interview Wednesday.
 
That would put the budget for acquisitions at ¥150 billion ($1.2 billion), based on the company’s latest financial results. Its current debt-to-equity ratio is about 30%.
 
Ajinomoto has set a goal of ranking among the world’s 10 biggest food makers by the 2020 fiscal year. Like many Japanese companies, it has set its sights on overseas acquisitions as Japan’s population ages and shrinks.
 
The company bought Texas-based frozen-food maker Windsor Quality Holdings L.P. last year for about $800 million, giving it the top position in North America’s Asian and ethnic frozen-food sector.
 
Still, the goal is some distance away. Ajinomoto—a market leader in amino acids—ranked 31st in the packaged-food industry by sales volume in 2014, according to data provided by market-research firm Euromonitor International. Mr. Nishii, who took office in June, said he plans to close the gap with acquisitions, tie-ups and structural reforms.
 
Mr. Nishii said Ajinomoto recently sent an official to its European headquarters in Paris to form an acquisitions team to hunt for deals in the region. The company would like to expand its operational footprint in Europe, which is limited compared with those in other regions, he said.
 
Last year, Ajinomoto was outbid by Archer-Daniels-Midland Co. in the auction of Wild Flavors, a Swiss drink-flavor company.
 
Ajinomoto has had similar acquisition teams based in Brazil and Thailand since last year, looking for deals in Latin America and Southeast Asia, respectively, Mr. Nishii said. “We need to push for localization because there is a limit to handling important business strategies such as M&A at the Tokyo headquarters,” he said.
 
Makoto Morita, an analyst with Daiwa Securities Co., said Ajinomoto has set a lofty but achievable goal, and meeting it will depend on the quality of its acquisitions.
 
“Since Ajinomoto already has solid foundations in Asia and South America and now has a strong base in the frozen-food market in the U.S., its challenge remains in Europe, where it lacks a core business,” Mr. Morita said.
 
Mr. Nishii spent the past two years in Brazil leading Ajinomoto’s Latin America operations. Brazil is one of the five countries the company thinks most important, along with Vietnam, the Philippines, Thailand and Indonesia.
 
The company is trying to expand its product portfolios in those five countries by 2025-2030, when their economic growth is expected to begin cooling down, he said.
 
Mr. Nishii maintains an optimistic view of emerging economies in the near term despite slowing growth in China. While many countries’ economies are linked to China’s, their middle classes are expected to continue growing, contributing to Ajinomoto’s sales, he said.
 
Of Ajinomoto’s international sales of seasoning and processed food during the April-June quarter, 81% came from Asia ex-Japan, compared with 13% from South America, 5% in Europe and 1% in North America.
 
By Megumi Fujikawa 
 

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