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Kirin Ends Brazil Venture with Sale to Heineken

02/15/2017 - 11h26

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KANA INAGAKI
FINANCIAL TIMES

Kirin has ended its ill-fated venture in Brazil with the $704 million sale of its struggling business to Heineken, as the Japanese brewer shifts its overseas spending to Southeast Asia.

The deal, announced on monday (13), will make Heineken the second-largest beer company in Brazil with a 17 per cent market share, allowing the Dutch brewer to challenge the dominance of rival Anheuser-Busch InBev in its biggest market.

Kirin entered Brazil, the world's third-biggest beer market, in 2011 with the $3.9 billion acquisition of family-owned Schincariol as it sought to expand beyond its home market.

But the purchase weighed on Kirin's performance, as the Brazilian economy suffered a sharp slowdown. The Japanese group was also forced into a battle for control of the group by some members of the Schincariol family who had sought a court injunction against the acquisition.

Kirin's beer volume sales in Brazil have fallen 25 per cent since 2012 and in 2015 the group posted its first annual net loss since it listed in 1949, after struggling to turn round the Brazilian business. The unit reported an operating loss of $163 million in 2015, which narrowed to $284 million last year.

In a statement yesterday, Kirin said it had reached the conclusion "that there are limitations in transforming Brasil Kirin into a sustainable and high-profitable business on its own".

Kirin's Brazil troubles had prompted it to shun big acquisitions in recent years. But the group has signalled it will continue to invest in Southeast Asia where it owns a 48 per cent stake in San Miguel Brewery in the Philippines.

Together with the sale of the Brazilian unit, the brewer said it had also agreed to invest $4.3 million to take a majority stake in Mandalay Brewery of Myanmar. The deal further cements its foothold in the fast-growing market following its $560 million purchase of Fraser and Neave's 55 per cent stake in Myanmar Brewery in 2015.

Despite difficult economic conditions in Brazil, Heineken said the longer-term fundamentals of the country's beer market were attractive because of the country's expanding population.

"This transaction marks a step-change in scale in an exciting beer market, building on our success to date in the premium segment and strengthening our platform for future growth," said Jean-François van Boxmeer, Heineken chief executive.

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