Maruha, Nichiro Shares Surge on Seafood Merger Plan

Maruha, Nichiro Shares Surge on Seafood Merger Plan

By Stuart Biggs

Dec. 12 (Bloomberg) -- Shares of Maruha Group Inc., a Japanese maker of processed and frozen seafood, surged for a second day after the company said it will merge with smaller rival Nichiro Corp. Nichiro's stock gained the most since 1999.

Maruha said yesterday it will combine with Nichiro in an effort to reduce costs through streamlining operations, and to increase procurement capacity. The company called the combination a merger, without giving a stock-swap ratio. Nichiro has a market capitalization of 39.8 billion yen ($340 million), compared with Maruha's 95.7 billion yen market value.

Japan's seafood companies are facing rising costs caused by diminishing global fish supply and reduced quotas amid less domestic demand as the country's population shrinks. This puts pressure on margins and industry consolidation makes sense, said analysts including Fumiyuki Nakanishi.

``The domestic market is not going to grow as Japan's population is declining,'' said Nakanishi, a Tokyo-based strategist at SMBC Friend Securities Co. ``The Maruha and Nichiro merger is the start of a realignment in the food industry.''

Maruha shares rose 6.4 percent, or 16 yen, to 266 yen at the 3 p.m. close on the Tokyo Stock Exchange. The shares climbed 6.4 percent yesterday. Nichiro shares, the biggest gainer on the first section of the Tokyo exchange, surged 14.2 percent, or 30 yen, to 242 yen, having jumped 10 percent yesterday.

The 6-member Topix Fishery, Agriculture and Forestry index rose the most among industry groups, gaining 2.6 percent, or 11.3 index points, to 442.6.

The Topix Foods index gained 1 percent after shares in Yakult Honsha Co. rose 8 percent, or 240 yen, to 3260 yen on speculation the Maruha-Nichiro merger would accelerate consolidation in Japan's food industry.

To contact the reporter on this story: Stuart Biggs in Tokyo at Sbiggs3@bloomberg.net

Last Updated: December 12, 2006 01:36 EST