Buffett Eyeing Kirin Brewery? (BRKA, KNBWY)

Includes: BRK.A, KNBWY
by: Steven Towns

The DealBook blog at the New York Times (nytimes.com) screened the numbers on a global scale to see what companies Warren Buffett might have in mind regarding his $15 billion acquisition "tease" mentioned at Berkshire Hathaway's (BRKA) annual meeting this past Saturday. Interestingly Kirin Brewery (OTCPK:KNBWY) was a potential candidate.

What's even more interesting is:

(1) Kirin is Japanese owned and Buffett has made two steps toward embracing overseas investments, (1a) first by buying Iscar, an Israeli precision metal working tools company, and (1b) secondly by announcing that "it's not a low probability" that he buy whole companies in Japan someday.

(2) Furthermore, as the Dealbook points out, Kirin Brewery is a beverage play which would fit Buffett's style of investment plays.

(3) Lastly, but not of least importance, I learned from Hoovers that Kirin Brewery of America uses Anheuser-Busch's (NYSE:BUD) facilities in Los Angeles to brew four types of Kirin beers and then supply them using BUD's network of wholesalers.

Can all of this be coincidental?

Maybe -- because as of the latest information available Kirin Brewery owns 59.4% of Kirin Beverage Co. (Tokyo: 2595), which just so happens to be a direct competitor of Coca-Cola Japan. I am not sure it would make sense to buy a strong competitor to one of Berkshire's core holdings in a country that reportedly contributes 20% of Coca-Cola's (NYSE:KO) net income. Also, Kirin Brewery's market cap is rapidly approaching US$16 billion because of the strengthening yen and strong sales volume of a lower-end lower-taxed type of beer (known as the 3rd-beer) that has some investors buying shares as a defensive play. Even if Kirin's share price were to stay flat, any further strengthening of the yen would increase acquisition costs, which as we all know would throw a monkey wrench into any acquisition plans by Buffett since he lives and dies by valuation.

Kirin Brewery is owned by the Mitsubishi Corporation (OTCPK:MSBHY). Mitsubishi is a keiretsu and may be unwilling to simply let Kirin go for market price. It's not that Mitsubishi would never sell because one example that comes to mind is the distressed Mitsubishi Motors Corporation (Tokyo: 7211) that is still partially owned by the Group but has been in the hands of a number of companies including foreign ones in recent years.

Taking the last two paragraphs into consideration it seems rather unlikely Kirin Brewery is a potential target of Berkshire's cash pile. In the spirit of things however, grab a Bud or a Kirin and enjoy.

KNBWY 1-yr chart: