Heineken Is Taking On Anheuser-Busch With a New $1.1 Billion Deal
Heineken’s on AB-InBev’s tail, as it’s in the midst of acquiring Kirin Holdings’s fiscally-bombed-out brewery in Brazil. This play will actually be a power move for them, as they’ll have more territory in the world’s third-largest mash market.
Additionally, the green-glassed bottlers are sliding into the number-two spot in the South American country—a 19 percent share right under Anheuser-Busch InBev (BUD +0.33%). With Kirin’s debt, Heineken has agreed to pay the huge, sum total of $1.09 billion!
As for Kirin itself, things were not looking cool at all—KNBY, -5.83%. As they bow out of the Brazilian market, they’re probably reflecting on their ultimate loss of $3.9 billion from buying 12 breweries in 2011—market shares sizzled out; raw-material costs became too much (weak currency). But there were a number of seemingly difficult hoops for the Japanese outfit to jump through including economic risks and beer-and-soft-drink markets that were stale and competitive—this presented “limitations” in terms of Brasil Kirin’s profit goals. Their 2016 operating losses were some 284-million reais (a little over $91 million).
While’s Brazil’s looking at another recession, Heineken (HKHHF, -0.04%) is confident their beer market will sustain in the long term—fast-growing premium segments. Further, this acquisition up the brewer’s north-to-northeast Brazilian visibility, ignite sales of Heineken and Sol and yield cost savings. All this in addition to their 2010 acquisition of FEMSA’s five, Brazilian breweries.
“None of the normal ratios work because it’s loss-making, but it’s a very attractive price,” Bernstein Research Beverage Analyst Trevor Stirling said.
Other analysts have added the deal is crucial, as it’ll give Heineken the boost they need to better rival AB-InBev. But the beer behemoth has pushed back with them dipping into Heineken’s turf via AB-InBev overthrowing SABMiller.
Upon a Brazilian anti-trust agency’s approval, Heineken will have their additional areas by roughly June 2017.