Kirin Seen Paying Premium to Enter Brazil

Kirin’s BRL3.95bn ($2.52bn) purchase of a 50.45% stake in Brazilian brewer Schincariol is seen as expensive, but the Japanese acquirer was prepared to pay more than competing bidders as it looks to gain a foothold in Brazil’s high-growth market, analysts say. Although valuations are difficult to calculate independently as Schincariol is private, the acquirer says the deal represents a 15.7x EV/Ebitda price over the 12 months to March 2011. The bid was significantly higher than the value Heineken and SABMiller had put on the asset when they were heard submitting respective bids of BRL2.2bn and BRL1.8bn. But, according to one analyst, such behavior is typical of Japanese acquirers looking to gain exposure to new markets. “It sounds a lot more expensive,” than other deals in the sector, says one Sao Paulo-based equity analyst. AnBev, for example, has an implied EV/Ebitda of around 14x. Meanwhile, by purchasing Schincariol, Heineken and SABMiller could have taken advantage of synergies that simply don’t exist for the Japanese brewer, but both appeared unwilling to match Kirin’s price. In theory, Kirin could reduce the cost of the deal by buying the remaining 49.55% stake from the minority shareholders at a lower multiple, though this seems unlikely given such sellers are already protesting the purchase (See ‘Schin Shareholders Sue to Stop Sale’). Despite expectations to the contrary, the purchase is unlikely to have a major impact on the Brazilian beer and beverage market. It may have been a different story if SAB Miller or Heineken had made the acquisition and taken a major lead over competitors, but a newcomer like Kirin is unlikely to upset the existing dynamics of the market. “I don’t think it really changes anything,” says one equity analyst. That said, the deal now leaves Petropolis as the only major independent brewery in Brazil, should other players want to consolidate their position. Heineken, for example, could choose to take it over now that Schincariol is of