By Taiga Uranaka and Ritsuko Shimizu
TOKYO (Reuters) - Suntory Holdings Ltd's food and soft drinks unit is set to price on Monday an initial public offering that could raise as much as $4.8 billion, making it Asia's biggest IPO this year and bolstering the company's warchest for overseas acquisitions.
The IPO of the unit, Suntory Beverage and Food Ltd , is a test of investor appetite for new listings at a time of high volatility in Japanese stock markets. The benchmark Nikkei <.n225> has lost about 17 percent since hitting a 5-1/2 year high in late May.</.n225>
The maker of Boss canned coffee will use the funds to ramp up its acquisition drive with a focus on fast-growing Southeast Asia, although it and Japanese peers like Kirin Holdings Co Ltd are facing intensifying competition for beverage-company acquisitions in that region.
"There are a host of enthusiastic buyers, and sellers tend to be bullish," said Masaaki Kitami, an analyst at Merrill Lynch Japan Securities Co.
Suntory Beverage said last week that it had set an indicative range of 3,000 yen to 3,800 yen per share, a relatively wide band in reflection of the recent stock market volatility. About 40 percent of its outstanding shares are on offer.
At the top of the range, it would raise 470 billion yen ($4.8 billion) including the overallotment. That would be more than double the $2.1 billion raised by the infrastructure fund of Thailand's BTS Group Holdings Pcl , which has been the biggest IPO in Asia so far this year.
At that price, it would give Suntory Beverage a market capitalization of 1.17 trillion yen, behind Kirin's 1.6 trillion yen and Asahi Group Holdings' 1.2 trillion yen.
Privately held Suntory Holdings is led by President Nobutada Saji, the 67-year-old grandson of the company's founder. Although the company is known for its Premium Malt's beer and whisky, its non-alcoholic drinks unit Suntory Beverage generates half of the group's revenue.
Suntory Beverage said it expects its net profit to rise 50 percent to 35 billion yen and its revenue to increase 14 percent to 1.13 trillion yen this year. It has set a target for annual revenue growth of at least 5 percent over the next three years.
In Japan, Suntory is the second-largest soft drinks maker after Coca-Cola Co and the gap in their market share has been narrowing. "In terms of domestic share, Coca-Cola is 27.9 percent and Suntory 19.6 percent. The gap used to be much bigger," said Kazuhiro Miyashita, editor of a trade magazine.
Still, Suntory and its rivals see little room for growth in their saturated home market and have set their sights overseas in recent years.
Suntory acquired soft drinks maker Orangina Schweppes and New Zealand's No. 2 beverage firm Funcor Group, both in 2009. In 2011, it entered into a joint venture with Indonesian food and beverage group GarudaFood. Suntory has said that it is also eyeing the Middle East, Africa and Latin America through acquisitions.
But industry officials and analysts say that acquisitions, especially in Southeast Asia, are increasingly costly and difficult to execute.
Such concerns came to light earlier this year when Kirin lost the chance to buy Singapore-listed Fraser and Neave Ltd's (F&N) food and beverage business after Thailand's TCC Assets Ltd and Thai Beverage PCL successfully acquired the control of F&N.
Kirin sold its 15 percent stake in F&N to TCC Assets after a Thai beer baron won a two-month bidding war with an Indonesian group, a major setback for the Japanese company to gain quick access to the market. ($1 = 97.4750 Japanese yen)
(Reporting by Taiga Uranaka, Emi Emoto and Ritsuko Shimizu; Editing by Chris Gallagher)