Heineken takes on AB InBev in Brazil with $1 billion Kirin deal

Heineken N.V. (HKHHF.PK) announced it has entered into an agreement with Kirin Holdings Company, Limited to acquire Brasil Kirin Holding S.A., a beer and soft drinks producer in Brazil.

Brasil Kirin operates 12 production facilities with its own distribution network and has a strong presence in the North and the North East of Brazil, where Heineken now has less exposure.

Along with the five breweries and sales network that it bought from Femsa in 2010, Heineken will become a significant player in what is the world's third largest beer market, after China and North America.

Heinken stock was up 0.39% in Monday morning trading in Amsterdam to change hands at €73.91, extending the gain to 3.85% over the past three months.

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Today, Heineken now operates five breweries in Brazil and has a strategic distribution partnership with Coca-Cola bottlers.

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

In a statement, the company said, "Considering various risks associated with (the) Brazilian economy and (the) stagnant and competitive situation in (the) Brazilian beer and soft drink markets, Kirin has come to the conclusion that there are certain limitations in transforming Brasil Kirin into a sustainable and high-profitable business on its own". Kirin said the unit made an operating loss of 284 million reais in 2016.

The acquisition is subject to approval from Brazilian regulatory authorities and is expected in the first half of this year. "I look forward to welcoming our new colleagues from Brasil Kirin into HEINEKEN and working with them to take the combined business forward".