Heineken to buy Kirin Holdings Brazilian unit for $706 mn

Dutch brewer Heineken NV today struck a deal to buy Japanese brewer Kirin Holdings' Brazilian unit Brazil Kirin Holding SA for €664 million ($706 million), in order to become the second-largest beer company in Brazil.

The price paid equates to an enterprise value of €1.025 billion, Heineken said in a statement.

Kirin had acquired Brazilian beer and soft drinks maker Schincariol in two stages in 2011 for $3.96 billion and later renamed it Brazil Kirin.

Founded in 1939 by the son of Italian immigrants, Schincariol initially made soft drinks, cocoa liqueur and cognac and later expanded to beer.

Brazil Kirin, the country's second-largest brewery and beverage company, has 12 factories in 11 states, 20 distribution centers and 190 resellers that serve around 600,000 points of sales in the country, and employs around 11,000 people.

Its portfolio includes Schin, one of Brazil's largest brands, as well as the Devassa brand, and speciality brands like Baden Baden and Eisenbahn.

Brasil Kirin also has a soft drinks business comprising carbonated drinks, bottled water and other beverages, including the iconic Itubaína brand.

It holds around 9 per cent share of the Brazilian beer market, behind Anheuser-Busch InBev with 67 per cent and 12 per cent held by the Petrópolis Group, and a 2 per cent share of the soft drinks market.

The Sao Paulo-based company produces about 3.0 billion liters of beer a year, and exports its products to the Mercosul, Europe, the US, Asia and Oceania.

In the first half, Brazil's Kirin reported operating losses of ¥7 billion (R$ 225.2 million), compared to losses of ¥600 million in the same period of 2015, while revenue declined by 21 per cent to ¥50.7 Billion (R$ 1.63 billion). It wrote off R$ 3.88 billion at end 2015.

The proposed deal will allow Heineken to more than double its production capacity from 20 million hectoliters to 50 million hectoliters in the country.

Heineken expanded its footprint in Brazil through the acquisition of the beer operations of Fomento Económico Mexicano SAB de CV in 2010 and since then, it has increased its market share to 10 per cent.

Heineken currently operates 5 breweries in Brazil and has a distribution partnership with Coca-Cola bottlers.