The transaction, announced today, involves the allocation of 0.95 shares of Ajinomoto for each share of Calpis, with a total value of US$680m. When the transaction is competed, expected to be at the end of November, Calpis will be a subsidiary of Ajinomoto. "The business environment in the food industry, in which both companies operate, has changed significantly over the past several years in Japan and overseas," said Ajinomoto in its announcement of the merger. "Dealing with these changes requires companies to do even more to provide high-value-added products and services to consumers." Ajinomoto has previously implemented a medium- to long-term management strategy called A-dvance10, part of which involves developing the health and nutrition side of its business into a pillar of growth. It is already active in some health-related areas of the food industry, including amino acids, medical foods and sweeteners. By bringing Calpis into the fold it says it will be able to tap Calpis' expertise in the beverage field, including lactobacillus and microorganism technology, to offer more value-added products to market. It will also be able to make use of the Calpis brand, which has a high level of healthy association due to the lactic-acid based drinks bearing the name - particularly in its home market. According to Reuters, Ajinomoto president Norio Yamaguchi told a news conference that the company plans to continue using mergers and acquisitions to expand in the Japanese market, where growth opportunities are said to be limited as the population declines. However Japan is at the forefront of development in the functional and health foods, with a high innovation turn over and the most enduring trends attracting attention in the US and Europe. Suitably, then, Ajinomoto has said that other expected synergies include cooperation in overseas arena. Ajinomoto already has a strong presence in the US. The Calpis business is expected to achieve growth by being able to piggy-back on Ajinomoto's business base. The two companies will also be able to team-up on research and development, and reduce common expenses through integration. Ajinomoto and Calpis have a historical relationship: Ajinomoto already owns 19,672,750 shares of Calpis - 24.8 of the total. The integration will also bring about a reduction in common expenses for the two companies. In terms of the working arrangements, the companies are setting up a Synergy Committee to examine how best to realise the benefits of the merger. In the meantime, Calpis' existing management team and systems will remain in place, and it will continue to exist as an independent company. At the end of 2006 Calpis reported net sales of ?120,445m ($989.4m) and ordinary income of ? 5,426m ($4.5m). Ajinomoto's net sales for its last reported full year (ended March 31 2007) were ?1,158,510m ($9,515.6m), and ordinary income was ? 61,589m ($505.9m).