HEINEKEN SETS ITS 2017 TARGET ON BRAZIL
Heineken (HKHHF) explores Latino America as it begins talks to buy the Brazilian unit of Kirin, potentially paying up to $872 million. This deal would give the company close to a 20 percent market share, well behind its dominant rival, Anheuser-Busch InBev.
The Dutch brewer confirmed this stating that it was in talks about “a potential transaction in respect of Brasil Kirin”, however cautioning that there was “no certainty that an agreement will be reached.”
Competition in the beer industry has increased ever since the $103 billion merger of the world’s two biggest brewers, AB InBev and SAB Miller.
Kirin began operations in Brazil, the world’s third largest market for beer, in 2011, after acquiring Schincariol, a Brazilian brewery. However, the economic slowdown in the country in recent years has made competition among brewers stiff. Kirin, which also owns Japanese beer Kirin Ichiban, said on Friday it was “reviewing all options”.
The Amsterdam-based beer giant got a perch in the Brazilian market in 2010 when it bought Femsa, owner of the Kaiser and Sol brands. It is currently the No. 3 player, holding around a 10 percent market share, according to MarketLine research
Although Heineken does not explain its margin of profit in the country, Brazil has been known to be difficult for brewers. The country’s beer market will be worth close to $60 billion by 2020, up from $40 billion in 2015, according to MarketLine. Heineken is maneuvering for a bigger portion of that growth.
An $872 million price tag for the potential deal, reported by the Japanes business daily Nikkei, implies a valuation of 0.9 times the forecast 2016 revenue — around $980 million. Heineken trades on a multiple of 2.5 times sales, Eikon data shows. Kirin, back in the day, paid 2.2 times forecast revenue for the business, then called Schincariol.
