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Australian authorities' decision to thwart Asahi's takeover of P&N Beverages throws up speculation on what the Japanese drinks firm will do next and whether a rival group might take advantage of its misfortune.

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The decision is certain to be a big blow for Asahi, which had hoped to consolidate its Schweppes Australia business with P&N in Australia, to make it a strong number two in the country's soft drinks market, behind Coca-Cola Amatil.

P&N would have added around 50% to Asahi's current annual soft drinks sales in Australia.

The Australian Competition and Consumer Commission (ACCC) cited concerns about competition, ruling that Asahi's purchase of P&N would "remove a vigorous and effective competitor". In particular, the watchdog said that the deal could cripple competition in private label carbonated soft drinks (CSD).

Currently, P&N holds a 3.4% share of the Australian CSD market, while Schweppes accounts for 20%. This compares to a 72% share held by Coca-Cola Amatil. Private label represents 1.1% of the market.

Now that the ACCC has poured cold water on the deal, Asahi will have to rethink its strategy in Australia. In addition, some analysts believe Asahi is running out of targets in the Asia Pacific region, which, if true, could dent the firm's drive to expand its business outside of Japan's sluggish drinks market.

"It seems that there are fewer and fewer companies in the Asia and Oceania region that Japanese companies will be able to generate synergies with, so it would be detrimental to Asahi if it cannot find an alternative in this region," SMBC Friend Research Center analyst Yoshiaki Yamaguchi told Dow Jones.

In 2009, Asahi made two major purchases. It acquired a 19.9% stake in Chinese brewer Tsingtao for US$667m, and bought Schweppes Australia. Last year, it agreed to buy 6.54% of Ting Hsin (Cayman Islands) Holding Corp, in a deal valued at $520m.

P&N was a logical next step in Australia. The company has four manufacturing sites, which produce around 250m litres of drinks annually.

Now, Asahi's failure to seal the deal could turn out to be a double-whammy, with speculation that others could swoop for P&N. There has already been talk that Suntory Holdings, already owner of the Frucor soft drinks business in Australia and New Zealand, has been stalking P&N.

While the ACCC decision won't have come as a complete surprise to Asahi, it now needs to show evidence that it has a plan B in Australia.


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