Kirin buys the rest of Schincariol

Kirin Holdings on 4 November 2011 agreed to buy out shareholders in Brazilian beermaker Schincariol Participacoes e Representacoes, completing its biggest acquisition to date.

The Japanese brewer will pay 2.35 billion reais (USD 1.35 billion) for the 49.54 percent stake, giving it control of all outstanding shares, the company said in a statement. The deal settles a dispute with shareholders who had challenged the Tokyo-based beermaker’s acquisition of half of Schincariol earlier this year in the courts.

Kirin is paying about 2.2 times 2010 net revenue for the company, compared with the median of 1.3 times sales of 20 similar beverage deals announced or completed this year, according to data compiled by Bloomberg.

The minority shareholders did not get a deal as sweet as their cousins did when they sold their majority stake to Kirin in August 2011.

Now that they have agreed to sell out, all of the Schincariol family members will leave the company and Kirin plans to send executives to the Brazilian company’s board and as many as ten additional employees to manage the company, it was reported.

The Schincariol acquisition would be this year’s second largest in the beer industry after SABMiller's announced its USD 11.9 billion purchase of Australia’s Fosters Group.

Kirin’s recent purchase values Schincariol at about USD 3.91 billion, excluding debt, when combined with the 3.95 billion reais (USD 2.56 billion) purchase completed last month of a 50.45 percent stake in the closely held company.

Kirin also agreed to assume 1.1 billion reais of debt and estimated 2.1 billion reais of potential labor, legal and tax liabilities. That could add another USD 1.8 billion to the already steep price tag for Schincariol, which Kirin put at about 15.7 times estimated EBITDA.

Brazil is the world's third-largest beer market after China and the U.S., with beer consumption rising in recent years buoyed by an economic boom and rising wages. The market is dominated by AmBev, a unit of the world's major brewer AB-InBev, with a market share of near 70 percent.

On 4 November 2011 Kirin slashed its profit forecast for this fiscal year by almost half, partly because of a decline in the value of securities.

Net income will probably be 27 billion yen (USD 346 million) this year, compared with the previous estimate of 52 billion yen, according to a company statement.

The stockmarket does not seem to honour Kirin's acquisition. Since November 2010 Kirin's share price has dropped almost 20 percent.