NETHERLANDS – Japan’s Kirin Holdings and Heineken are in discussions about a possible purchase of the Kirin’s Brazilian beer operations, the Dutch brewer announced.

Earlier, Japan’s Nikkei reported that Heineken could pay around 100 billion ($869 million) yen for the deal, which could happen as soon as this year.

However, in a statement issued Friday, Heineken cautioned that there was “no certainty that an agreement will be reached.”

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, Nikkei said.

Nikkei also stated that Kirin is expected to make losses under the Heineken deal in the tens of billions of yens.

An acquisition of Kirin’s lossmaking business in Brazil would give Heineken 19% market share in a country where it currently has only 7% share of the market to Kirin’s 12%.

But more importantly, it would enable the Dutch brewer pose a stronger challenge to AB InBev, which dominates the market with 67% market share.

A deal would also scale up Heineken’s distribution system so it doesn’t have to rely on Coca-Cola’s bottler network in the country.

Kirin paid $3.9bn to acquire family-owned Schincariol, maker of Schin beer in 2011 as it looked for growth outside of its home market in Japan.

Dutch brewer Heineken N.V. said it is in discussion with Japanese brewer Kirin Holdings to acquire the company’s unprofitable Brazilian business

January 21, 2017;