Heineken in talks with Kirin to buy its Brazilian beer business
Heineken is meeting with the Japanese company to discuss the acquisition of Brasil Kirin, which could cost £705 million – a severe discount when it was valued at $4 billion in 2011.
Beer companies are springing into action following the ground-breaking merger between AB InBev and SAB Miller, with Heineken also acquiring 2,000 Punch Taverns pubs in the UK, a transaction costing £400 million. It was reported in September 2016 that Kirin was looking for partnerships to improve its Brazilian business, as despite Brazil being the third largest beer market globally, the nation has been in recession since 2014.
John Colley, a Professor of Practice in the Strategy and International Business Group at Warwick Business School, stated: "Heineken's new Brazilian purchase will need investment for some years but in the medium term will be a good buy.
"In effect the Heineken strategy is to acquire low risk bolt-on acquisitions to build share in long term growth markets. There is usually opportunity in crises and Heineken certainly sees one in Brasil Kirin.
"Heineken, now the world's second biggest brewer, has responded to AB InBev's $106 billion foray into growth markets buying SAB Miller by snapping up a troubled Brazilian Brewer.
"The Japanese Brewer Kirin acquired control in 2011 valuing the business at around $5.5 billion. However, the poor Brazilian economy has resulted in attempts to dispose of the loss-making brewery. The $870 million price tag suggests that competition to buy these operations has not been that intense.
"Heineken has Brazilian operations which will allow some integration and it also has Femsa which is a major South American Brewer based in Mexico but operating throughout South America. In effect Heineken has the infrastructure and local management to integrate the operations, remove cost and develop improved distribution which is key to the brewing industry."