Ajinomoto targets Europe with $1.3bn acquisitions pot

Executives at Ajinomoto’s international food businesses said the company had narrowed the search for its next takeover target to the UK, Germany or France — and could pursue deals in more than one of those.

The focus in Europe comes after Ajinomoto — among the world’s biggest producers of artificial sweetener and the first to mass-produce the flavour enhancer monosodium glutamate — agreed more than $1bn of dealmaking over the past two years.

It bought US frozen foods maker Windsor Quality Holdings for $800m in 2014 and last year built on that with $600m of purchases that expanded its footprint in Africa and the Middle East. The company has said it still has capacity to spend a further ¥150bn ($1.3bn) on acquisitions.

A deal in Europe, which analysts expect to be struck this year, would fit Ajinomoto’s two-pronged strategy for growth: seeking revenues outside its declining home market of Japan and expanding its portfolio of food products to compete with multinational groups such as Nestlé and Unilever. Many of the companies with which Ajinomoto will compete are already bulk customers for its MSG, aspartame sweetener and other flavourings.

“Our priority in Europe is UK, France and Germany,” Masayoshi Kurosaki, Ajinomoto’s corporate executive officer, said in an interview. “We’re narrowing our candidates but we don’t plan to finish [dealmaking] with just one country in Europe.”

Ajinomoto has long struggled to find a target in Europe after it lost a bidding war for Wild Flavors, a Switzerland-based food and drinks flavourings group, in 2014. But executives say the search is advancing.

The Japanese group’s recent acquisitions mark a shift from its traditional strategy of spending decades organically building its distribution and sales channels in Southeast Asian and Latin American markets.

One of the company’s boldest breaks from its usually cautious approach came when it agreed to buy one-third of South Africa’s Promasidor Holdings in November last year. The $532m purchase places Ajinomoto at the heart of the rapidly growing African market for powdered drinks and seasonings. Promasidor has a sales network that reaches 36 African countries, including Nigeria and Egypt.

In a signal of the urgency behind Ajinomoto’s push to position itself in overseas markets with growing populations and expanding tastes, it rapidly followed the Promisador deal with the takeover of a Turkish food company, also in November.

“We previously preferred to take a majority stake when we acquired companies but our key priority now is to buy time to build our sales network and expand our brand penetration,” Mr Kurosaki said.

After the acquisition of Windsor, North America generates 27 per cent of its ¥386bn overseas sales of seasonings and frozen food, while Asia accounts for 60 per cent and Europe just 4 per cent.