Brewer Petropolis in sale speculation as owner is embroiled in corruption scandal

You bet that Heineken will jump at the opportunity should Brazil’s brewer Petropolis be sold. Analysts have suggested that increasing pressure on the Brazilian beer-to-beverage group could lead it to seek a merger with a global brewer in order to remain competitive.

The acquisition of Brasil Kirin by Heineken earlier this year is a cause of the growing pressure, as it raises Heineken’s beer market share from 9 percent to 17.4 percent, ahead of the 14.1 percent market share held by Petropolis, whilst market leader AmBev holds a 67 percent share.

Although patching up with Heineken would seem logical, as Petropolis operates six plants and owns its own distribution, making it a very attractive target,

there are no indications that Petropolis is currently willing to sell.

Beer industry veteran Walter Faria bought Grupo Petropolis in 1998 and transformed it into one of Brazil’s largest beer-and-beverage companies. Mr Faria had previously worked as a distributor for Schincariol, a Brazilian brewer that Japan’s Kirin bought in 2012 and then sold to Heineken. Reportedly, Petropolis’ Itaipava beer is the country’s second-biggest brand behind Skol, which is brewed by AmBev.

However, never say never. According to rumour Mr Faria had already been in sales talks with SABMiller, following their distribution deal for Brazil which was signed in 2014.

From what we at Brauwelt International have heard, negotiations were very much advanced, valuing Petropolis at about USD 8 billion, when SABMiller’s people put the proposal to their board. Guess their surprise when SABMiller’s major shareholders, Altria and the Santo Domingos, said “err, actually no” - or something to this effect - because behind SABMiller’s back the shareholders had already secretly succumbed to an offer to sell SABMiller to AB-InBev.

Insiders think that, if Mr Faria was willing to exit then, he might even be keener to cash out now as Brazilian media have recently voiced serious concerns over his future, due to his involvement in the Lava-Jato (“Car Wash”) corruption investigation, Brazil's corruption probe into the state oil giant Petrobras. Dozens of companies have acknowledged paying bribes to politicians and officials in exchange for contracts with Petrobras.

At the centre of Brazil’s largest corruption scandal is the Odebrecht group, Latin America’s major construction conglomerate, which was started as a small family construction group in the 1940s by Brazilians of German origin. It grew quickly and at its peak, around 2010, the company had 181,000 employees across 21 countries. As was reported, its focus is on building large projects, such as Caracas’ metro, a port in Cuba and much of the infrastructure used by Brazil in the 2014 World Cup, including some of the stadiums.

In April 2017, one of Odebrecht’s former top people said in court that his firm used Petropolis to donate about USD 15 million to the presidential campaign of Dilma Rousseff-Michel Temer in 2014.

According to Brazilian media, the former Odebrecht executive admitted he used companies from the Petropolis group to make intermediate donations to politicians because Odebrecht had already reached its legal limit (a percentage of turnover) for donations to parties. So the brewery made the donations in its own name, and Odebrecht later reimbursed it.

Last year, Odebrecht signed what has been described as the world’s largest leniency deal with US and Swiss authorities, in which it confessed to corruption and paid USD 2.6 billion in fines.

These revelations are having strong political and economic repercussions throughout Latin America.

But, this being Brazil, the outcome of the Odebrecht scandal and Petropolis’ role in it, remain completely unpredictable. As Brazilians say when investigations don’t bear fruit, “it all ended in a pizza.”