Australian beverages seen quenching brewers' M&A thirst

By Simone Giuliani

MELBOURNE (Reuters) - The invasion of Australia's drinks industry has only just begun, as foreign suitors armed with cash and stronger currencies look to smash down the door to one of the world's most profitable markets.

The tumbling Australian dollar and some strategic blunders have already weakened the local industry's defenses, analysts say, pointing to moves this week by U.S.-listed Molson Coors Brewing Co (TAP.N) and Japan's Kirin Holdings Co Ltd (2503.T).

"This is certainly not the end game," said Theo Maas, partner at Fortis Investment Partners.

"I certainly don't think the Australian beverage landscape is going to look the same in 12 months' time."

In the past two weeks, Molson revealed it had a 5 percent interest in Australia's largest brewer, Foster's Group (FGL.AX), and Kirin's Australian affiliate, Lion Nathan (LNN.AX), made a A$7.6 billion for soft-drink bottler Coca-Cola Amatil (CCL.AX) owned about 30 percent by U.S.-based Coca-Cola Co (KO.N).

Australia's beer market has long operated as a duopoly between Foster's and Lion Nathan while Coca-Cola Amatil has dominated soft drinks. But this looks likely to change as Australia's small, high-margin market attracts foreign envy.

Japanese brewers seeking growth outside a shrinking home market are expected to be among those that reshape the sector, while international brewers Molson, SABMiller Plc (SAB.L) and Heineken (HEIN.AS) are also expected to be interested.

Kirin, which holds 46 percent of Lion Nathan, is not only backing the hostile bid for Coca-Cola Amatil. It has also just completed its entry into the milk market, buying Australia's top milk manufacturer, Dairy Farmers.  Continued...