Kirin: Fancl Buyout May Facilitate Its Ambition, but Underlying Challenges Facing Kyowa Hakko Persist

We anticipated narrow-moat Kirin’s announcement of a tender offer to buy out the rest of nutritional supplement company Fancl's shares, although the timing is earlier than we expected. The deal, priced at around 17.8 times 2024 PitchBook consensus EBITDA, does not look particularly pricey compared with Blackmores’ 20 times and the price it paid for 30% of Fancl in 2019. The acquisition will have an immaterial impact on our fair value estimate of JPY 2,600. We continue to see turning Kyowa Hakko Bio into profitability as a priority to restore the market’s confidence in its strategic pivot to health science expansion.