* Deal could be worth $105 mln - source
* Japan’s soft drinks market dominated by Coca-Cola
* Sapporo and Pokka expected to remain small players (Recasts with official announcement, adds comment)
By Taiga Uranaka
TOKYO, Aug 12 (Reuters) - Brewer Sapporo Holdings (2501.T) said it would buy into unlisted beverage maker Pokka, as depressed beer sales force it to seek growth in a Japanese soft drinks market dominated by Coca-Cola (KO.N).
Japanese drinks makers are banding together to both expand operations overseas and build scale at home.
Kirin Holdings (2503.T) and Suntory Holdings have started merger talks that could create not only Japan’s dominant beer company but also a soft drinks maker rivalling Coca-Cola’s 30 percent market share.
“I expect the consolidation to continue in the beverage industry,” said Tomonobu Tsunoyama, sector analyst at Tokai Tokyo Research Center. “There are too many players, and sales of green tea and bottled water, which had been growth drivers, have plateaued.”
Sapporo, whose biggest shareholder is the U.S. activist fund Steel Partners, will buy 21.7 percent of Pokka from investment fund Advantage Partners and others. Advantage Partners and CITIC Japan Partners own about 60 percent of Pokka, which is known for its canned coffee.
Sapporo, maker of Yebisu beer, said the terms of the deal were still under negotiation, but a source close to the deal said the stake was likely to be priced at nearly 10 billion yen ($105 million).
Analysts said the alliance with Pokka is unlikely to lift Sapporo’s beverage business significantly, given their small presence.
“Sapporo and Pokka’s market shares are both small, less than 2 percent each,” Credit Suisse analyst Yoshiyasu Okihira wrote. “The impact on Sapporo’s earnings would be very limited.”
Behind Coca-Cola in Japan’s packaged soft drinks market, Suntory has an 18.3 percent share and Kirin 11.1 percent, according to data from industry magazine publisher Inryo Soken. Sapporo has 1.4 percent and Pokka 1.8 percent.
The Nikkei business daily said earlier that Sapporo might forge a business and capital tie with Meiji Holdings (2269.T), a confectionary and dairy food maker, which owns about 20 percent of Pokka, but both Sapporo and Meiji said they were not considering such an alliance. ($1=95.98 Yen) (Additional reporting by Ritsuko Shimizu and Kiyoshi Takenaka; Editing by Edwina Gibbs & Ian Geoghegan)