Heineken Acquires Femsa Beer Unit for $7.7 B

123jump.com Staff
11 Jan, 2010
New York City

Heineken agreed to acquire the beer business of Mexico based Femsa SAB in a deal that values its Mexican business and exports operations at $7.7 billion or

[R]11:00 AM New York – Heineken agreed to acquire the beer business of Mexico based Femsa SAB in a deal that values its Mexican business and exports operations at $7.7 billion or €5.3 billion. The deal is expected to pave a way for Heineken to expand its operations in Latin America.[/R]

Heineken NV, the Dutch brewer agreed to acquire Fomento Económico Mexicano, S.A.B. de C.V for €5.3 billion or $7.7 billion. The deal price includes net debt and pension obligations of $2.1 billion or €1.5 billion.

SABMiller dropped out of the bidding war and said it is not prepared to pay more than $7 billion.

The deal paves a way for Heineken to tap into faster growing markets in Latin America compared to the matured markets of Europe. Global landscape for beer markets has been changing rapidly with markets in China and Asia expanding.

Heineken will acquire FEMSA Cerveza that includes the Mexican beer operations and its U.S. exports and the remaining 83% of Brazilian subsidiary of FEMSA that Heineken currently does not own.

After the transaction, FEMSA shareholders will acquire 20% holding in the Heinejen Group and will have the right to appoint non-executive representatives to the Supervisory Board of Heineken and one of will be appointed as a Vice Chairman and one will be appointed to the board of directors of Heineken Holding which has 50.005% holding in Heineken N.V.

The offer price is based on the share price of Heineken of €32.925 on January 8 and implied value of FEMSA Cerveza of €3.8 billion.

Heineken anticipates annual cost savings of 150 million by 2013 and said that after the deal its net debt to EBITDA ratio remains unchanged at 3.1 times.

Following the transaction, FEMSA will be the second largest shareholder in the Heineken Group holding 12.5% of Heineken and 14.9% of Heineken Holding together which represents a 20% interest in the Heineken Group.

L’Arche Green NV is the largest and controlling shareholder of Heineken Holding and has agreed to vote in favor of the deal. FEMSA controlling shareholders have also agreed to vote in favor of the deal.

Jose Antonio Fernandez Carbajal, chairman and CEO of FEMSA said, “In the context of the reconfiguration of the global brewing landscape, scale and geographic diversification are more important than ever, and this transaction responds to that imperative.”

Femsa after the sale is expected to focus on its soft drink sales business in a partnership with Coca Cola and Oxxo retail business.

Femsa SAB decreased 11% to Mexican Ps 56.16 in Mexico City trading and Heineken in Amsterdam trading increased 3.9% to €33.98.

Femsa SAB beer sales in Mexico are estimated to be around $2.9 billion of which 25% include sales in Brazil and exports to the U.S.

Heineken distributes Femsa brand beers in the U.S. through its network.

European and North American beer brewers have been acquiring Latin American companies as they search for growth on the continent.

Begium based Interbrew SA acquired Brazil based Cia. De Bebidas das Americas in 2004 and SABMiller Plc purchased Bavaria SA in 2005 to expand in Colombia.