Heineken expands in Brazil with Kirin brewing acquisition

FILE Heineken beer

Heineken (HEINY) has agreed to buy the Brazilian assets of Japanese Brewer Kirin (KNBWY) as the Dutch group seeks to compete with AB InBEV (BUD).

Dutch brewer Heineken the now loss-making Brazilian breweries of Japanese brewer Kirin Holdings, Heineken announced in a press release on Monday.

With the acquisition, HEINEKEN will become the second largest beer company in Brazil.

Heineken will pay Kirin Holdings $700m for the business which includes 12 breweries and a distribution network.

Kirin said that Brazil's economic risks and a stagnant and competitive beer and soft drink market meant there were "limitations" to making Brasil Kirin profitable.

It owns an extensive portfolio of beer brands and its share of the Brazilian beer market in 2015 was around 9%.

Heineken expects that the transaction provide significant cost synergies, through production efficiencies including logistics, brewery optimisation and optimisation of selling, general and administrative expenditures.

The Dutch beer-maker says that the Brazilian beer market is highly attractive with its growing population and positive GDP outlook.

The acquisition, dependent on approval by Brazil's antitrust agency, is expected to close in the first half of the year. Kirin said the unit made an operating loss of 284 million reais in 2016.

Heineken said the deal will transform its existing business across the country by extending its footprint, increasing scale and further strengthening its brand portfolio. "I look forward to welcoming our new colleagues from Brasil Kirin into HEINEKEN and working with them to take the combined business forward".

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