Japan’s Kirin buys majority stake in Schincariol
The rumour mongers were gob-smacked. Not Heineken, not SABMiller – it was Japan’s brewer Kirin that managed to clinch a deal with privately-owned beer and beverage company Schincariol.
The Tokyo-based company, which owns all of Australia‘s Lion Nathan and 48 percent of San Miguel Brewery of the Philippines, said on 2 August 2011 that it is buying a 50.45 percent stake in Brazil‘s second-biggest beer brewer from brothers Alexandre Schincariol and Adriano Schincariol for 3.95 billion reais (USD 2.6 billion/EUR 1.8 billion) excluding net debt.
The price was about 15.7 times estimated EBITDA compared to Heineken’s 11.2 EBITDA multiple for FEMSA in 2010. That ‘s a steep price for Schincariol which is trailing the market leader AmBev by a wide margin.
Brazil‘s market has long been dominated by AmBev (part of AB-InBev), which has a 69 percent market share.
Schincariol is second with 11 percent, ahead of a host of even smaller players, including Heineken’s Kaiser Brewery.
What makes the deal a particularly expensive one is that there will be no substantial synergies between Kirin and Schincariol.
Besides, Schincariol is not exactly what you would call highly profitable. Compared to AmBev’s EBIT margin of around 40 percent in 2010, Schincariol’s was 5 percent according to Kirin.
Finally, there is the matter of debt. The Brazilian publication “economia empresas” reported on 3 August 2011 that Schincariol’s debt could amount to over 1 billion reais (USD 630 million), half of which might have to be borne by Kirin.
As BRAUWELT International reported, the Schincariol brothers have been talking to potential bidders for several months. Media say that Kirin beat competing offers from SABMiller and Heineken, helped by the strength of the yen.
But minority shareholders – three Schincariol cousins, namely Jose, Daniela and Gilberto Schincariol, who own 49.55 percent of the company – called the sale illegitimate and have taken the issue to court. The cousins said the company‘s bylaws require that any shares put up for sale should first be offered to fellow shareholders.
As in most cases, the family dispute may be a dispute over money. The suit could be a simple matter of increasing the price in the event Kirin makes a bid to buy the rest of the company.
The family dispute also highlights the high stakes and great promise that some foreign firms see in Brazil. The country is the third-biggest beer market after China and the U.S. and nearly double the size of Japan.
While Japan’s beer consumption has been in decline for years, Brazil‘s beer consumption jumped 11 percent in 2010 from the year before, according to the National Brewing Association, an industry trade group.
Schincariol started out in 1939 as a soft drink vendor. In recent years, the company has advertised more aggressively, but every time it grabs a bit more market share, AmBev strikes back.
Whereas AmBev dominates most of Brazil, Schincariol is stronger in parts of the Northeast, which are faster growing.
Kirin said it had not decided which personnel it would send to Schincariol. Some Tokyo analysts commenting on the deal said that Kirin could be short of any qualified managers to be sent to Brazil.
Adriano Schincariol is reported to be staying on as CEO for three months and then act as an adviser to the company for a year.