Heineken to buy Mexican brewer Femsa
Heineken to buy Mexican brewer Femsa
Heineken to buy Mexican brewer Femsa
Heineken said Monday that it would buy the beer operations of Femsa, one of the biggest brewers in Mexico, in an all-share transaction that values the business at $7.6 billion. The move would further consolidate the beer industry into a few global players.
The move will make Heineken a “more competitive player in Latin America, one of the world’s most profitable and fastest-growing beer markets,” the chairman and chief executive of Heineken, Jean-François van Boxmeer, said in a statement.
Heineken will issue 86 million new shares to finance the deal, the first time it has done so for a takeover since 1968.
Heineken shares were up 1.075 euros, or 3.26 percent, to 34 euros on the Amsterdam exchange.
After the deal closes, Femsa will hold 20 percent of the Heineken Group, making it one of the Dutch brewer’s largest shareholders. Femsa will also have the right to appoint two nonexecutive directors. The transaction is expected be completed in the second quarter of 2010.
Femsa, which is formally known as Fomento Económico Mexicano S.A.B., makes Dos Equis and Tecate.
“It’s a transformational deal for Heineken,” said Marco Gulpers, beverage analyst at ING. “We were expecting a deal north of $10 billion. The way they structured it, this is creating more value.”
Over the last decade, companies in the beer industry have combined rapidly.
One of the most notable deals included the 2002 sale of Miller Brewing of the United States to South African Breweries for $3.6 billion.
Against the backdrop of “the reconfiguration of the global brewing landscape, scale and geographic diversification are more important than ever,” José Antonio Fernández Carbajal, chairman and chief executive of Femsa, said in a statement Monday.
Besides giving Heineken a bigger foothold in Latin America, especially the highly profitable Mexican market, the deal with Femsa also offers Heineken the 83 percent of Femsa’s Brazilian beer business that the Dutch company does not already own.
Femsa’s share of the Mexican beer market is 43 percent; it has a 9 percent share in Brazil.
For Femsa, merging with Heineken could help bolster its competitive position, especially as it continues to battle its larger Mexican rival, Grupo Modelo, in which AB InBev has a noncontrolling 50 percent stake. AB InBev is also strongly positioned in Brazil.
About a quarter of Femsa’s revenue in 2008 of 168 billion Mexican pesos ($13.3 billion) came from its beer operations. The company posted about $1.6 billion in operating profit that year.
Heineken said in its statement that it expected the transaction would provide cost savings of 150 million euros ($218 million) a year, within three years.
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