By Rory Gallivan, Megumi Fujikawa and Maarten Van Tartwijk

One of Japan's largest beer makers, Kirin Holdings Co., has thrown in the towel on its troubled Brazilian unit, selling it to Dutch brewer Heineken NV for EUR664 million ($704 million).

The deal, disclosed Monday, comes after Kirin took a nearly $1 billion impairment charge on its Brazil business in 2015. The country, once fast-growing, suffered its biggest economic contraction in 25 years in 2015 and continued shrinking last year. That has hit consumerspending and caused a slump in beer sales.

In a statement, Kirin said it considered the risks in the Brazilian economy and the beer market in making its move to exit. "There are certain limitations to transforming Brasil Kirin into a sustainable and highly profitable business on its own," Kirin said.

Heineken, which already has a beer business in Brazil, said the acquisition would make it the second-largest beer company in Brazil after the local business of Anheuser-Busch InBev NV. Heineken said the deal gives the Kirin unit an enterprise value of EUR1.025 billion. Brasil Kirin had a 9% share of the Brazilian beer market in 2015, Heineken said.

Kirin bought the Brazil unit in 2011 from a local family-owned brewer, but the acquisition soon dragged down the entire business of the Tokyo-based beer and soft-drink company. In 2015, Kirin reported the first net loss in its modern history because of its Brazil losses.

"While wesee growing demand over the long term" in South America, "it is difficult to compete with a rival which has nearly 70% of the market share," a Kirin spokesman said, referring to AB InBev.

Heineken's chief executive, Jean-Francois van Boxmeer, said he had "confidence in our ability to generate attractive returns over the long term."

In 2016, sales at Brasil Kirin declined to Yen118 billion ($1.04 billion) from Yen134 billion the previous year. Kirin Brasil's beers include Schin, Baden Baden and Eisenbahn.

The beer industry has been going through a global consolidation wave, and Japan's brewers have joined in the mergers and acquisitions rush. Kirin rival Asahi Group Holdings Ltd. in December agreed to buy brewing assets in five Eastern European nations from AB InBev for EUR7.3 billion. However, Kirin's Brazil experience shows that global expansion can backfire when Japanese companies enter distant and unfamiliar markets.

Write to Rory Gallivan at, Megumi Fujikawa at and Maarten Van Tartwijk at

(END) Dow Jones Newswires

February 14, 2017 02:47 ET (07:47 GMT)

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