Heineken (OTCQX:HEINY, OTCQX:HKHHF, OTCQX:HINKF) acquires Brasil Kirin Holdings for €664M ($704M) to make it the second largest beer company in Brazil behind Anheuser-Busch InBev (NYSE:BUD).
Dutch brewer Heineken the now loss-making Brazilian breweries of Japanese brewer Kirin Holdings, Heineken announced in a press release on Monday.
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.
The total value of retail sales in the Brazilian beer market is projected to grow at a CARG 2.3% by 2020, according to Euromonitor, which places the country's total volume consumption behind the United States of America and China, but higher than other beer traditional markets such as Germany and UK.
Heineken expects that the transaction provide significant cost synergies, through production efficiencies including logistics, brewery optimisation and optimisation of selling, general and administrative expenditures.
Heineken will pay Kirin Holdings $700m for the business which includes 12 breweries and a distribution network. The purchase does not add any additional brands to Heineken's current portfolio of 250 beer labels.
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".
The new deal is expected to increase Heineken's scale across Brazil and strengthen its brand portfolio.