Zacks_Analysts' Blog : FEMSA-Heineken Deal Approved - Analyst Blog

The Comisión Federal de Competencia, the anti-trust regulating authority under the Ministry of Economy, Mexico, recently approved the deal between FEMSA, formally known as Fomento Económico Mexicano, S.A.B de C.V. (FMX), one of the largest brewers in the country, and Heineken N.V., the largest brewery in Europe, for the acquisition of the beer operations of the former.

 

Heineken will acquire FEMSA Cerveza, comprising 100% of its Mexican beer operations (including the U.S. and other export business) and the remaining 83% of its Brazilian beer business that Heineken does not currently own.

The deal involving an all-share transaction is valued at $7.6 billion. With the deal, the Dutch company will gain a strategic foothold in the Latin American market, which is widely recognized as one of the world’s most profitable and fastest-growing beer markets.

 

On the other hand, the deal would enable FEMSA to strengthen its competitive position in the market and increase its operational and financial flexibility. The company currently holds 43% of the beer market in Mexico and 9% in Brazil.

 

According to the terms of the deal, FEMSA will hold 20% in the Heineken Group, making it one of the largest shareholders of the company. FEMSA will also have the right to appoint two non-executive directors in Heineken. In order to finance the deal, Heineken will issue 86 million new shares. The transaction is expected to be completed in the second quarter of 2010.