Heineken agrees to buy Kirin’s Brazilian unit

It’s official. Heineken will take over Kirin’s struggling Brazilian subsidiary, the Dutch brewer announced on 13 February 2017. The total consideration to be paid to Kirin for the shares is EUR 664 million (USD 706 million). This corresponds to an estimated enterprise value of EUR 1.0 billion (USD 1.1 billion) for Heineken.

Brasil Kirin, as the subsidiary is called, reported full year results for the year ended 31 December 2016 with revenues of BRL 3.7 billion (USD 1.18 billion) and an operating loss of BRL 262 million (USD 82 million).

That’s a far cry from what Kirin paid in 2011 when it acquired the brewer Schincariol for some USD 3.9 billion.

Once the deal is bedded down, Heineken will become the number two brewer in Brazil, behind AmBev. Brazil is the fifth largest country in the world with over 200 million people. Beer consumption in 2015 was 139 million hl, making it the third largest market globally.

Whilst the macroeconomic environment has deteriorated over the last few years, the longer term fundamentals of the Brazilian beer market are highly attractive, supported by a growing population and a positive GDP outlook, Heineken said.

Brasil Kirin operates 12 production facilities. It has a particularly strong presence in the north and northeast of the country, where Heineken currently has less exposure. Its share of the Brazilian beer market in 2015 was an estimated nine percent. The portfolio includes Schin, one of Brazil's largest brands covering the mainstream and value segments, as well as the Devassa brand. Furthermore, it owns the specialty brands Baden Baden and Eisenbahn, which will complement Heineken’s premium portfolio.

Heineken has five breweries and controls a market share of about ten percent.