Japan's Suntory considering merger with Kirin

By Mayumi Negishi and Nathan Layne

TOKYO (Reuters) - Japanese brewer Suntory Holdings Ltd said on Monday it was considering a merger with larger rival Kirin Holdings Co (2503.T) in a deal that would create one of the world's largest beverage and food firms.

The news sent shares of Kirin soaring 7.8 percent to a nine-month high and lifted shares of other brewers amid speculation that a deal would trigger consolidation in the sector.

A merger would put Kirin and unlisted Suntory on par in revenue terms with U.S.-based Kraft Foods (KFT.N) and Pepsico Inc (PEP.N), and give the two more pricing power in Japan's mature market.

"If a merger is realized, that would give them the market share to take leadership in pricing and help their soft drinks businesses -- a chronic weak spot in an ultra-competitive market" in Japan, said JP Morgan analyst Naomi Takagi.

"It's a huge positive if they can do it."

Suntory spokeswoman Naoko Tsuda said that the company was considering various options including a merger with Kirin but that nothing had been decided.

Kirin spokesman Mitsutake Matano declined comment on the possibility of a merger, repeating a statement that Kirin is working with Suntory on procurement, distribution and other business activities.

Kirin and Suntory are in talks to merge under a holding company, and aim to agree on the deal this year, the Nikkei business daily said, citing unidentified sources.