Snow Brand looks for 'broad alliance'


Snow Brand Food is already in liquidation, and new president Koshiro Iwase apologized for that company's behavior

By Alex Frew McMillan
CNN Hong Kong

TOKYO, Japan (CNN) -- Embattled Japanese milk company, Snow Brand Milk Co., says it is in talks for a "comprehensive alliance" with another farm cooperative.

It is talking on an overall alliance with the cooperative commonly known as Zenno in Japan. Its full name is the National Federation of Agricultural Cooperative Associations.

The deal is in the early stage, and the company said nothing is definite. But Snow Brand says it is after both an "operational alliance" and a "comprehensive business alliance" with Zenno.

In back-to-back press conferences on Thursday, the scandal-tainted company also confirmed it is still discussing a possible three-way pooling of its milk operations with Zenno and another cooperative.

Snow Brand stock closed up 5.13 percent at 164 yen ahead of the announcements, which were made after the market closed.

The Nikkei rose 1.34 percent for the day, to end at 11,568.82.

No bailout for the company

Also Thursday, Snow Brand's main creditor, Norinchukin Bank, denied it would prop up the ailing company with a bailout.

Japan's business year is coming to an end, so many troubled or debt-laden companies are looking for deals from their banks to keep them in operation.

But with bad loans piling up faster than banks can tackle them, there is heavy pressure for banks to deal with problem lenders -- either by letting them go under or forcing them to merge.

Analysts such as Jason Rogers at Barclays Capital have called some of the deals "questionable" merger-alliance proposals.

Tokyo-based Snow Brand, which itself started life as a cooperative back in 1925, said there is no firm timetable for any deal.

The three companies are likely to create a joint venture to manage their milk businesses, possibly this year. Each company will likely own one third of the JV.

Snow Brand is still reeling from a food poisoning scandal in June 2000 that left thousands sick around the city of Osaka.

Its brand suffered another blow this January, when its Snow Brand Food Co. subsidiary admitted to disguising Australian beef as Japanese to claim a government subsidy. That company is now in liquidation, set to end in April.

Snow Brand has also confessed to using past-due frozen butter without approval.