The Big Get Bigger

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Continuing the trend of consolidation among the world’s largest brewers, Heineken has announced an acquisition of Femsa, the Mexican brewing group behind brands including Dos Equis, Tecate and Sol.

In an all-share transaction worth $7.6 billion, the Dutch mega-brewer gains a valuable toehold in the growing Latin American beer market. SABMiller had been the odds-on favorite to buy the Mexican brewer, but, according to The New York Times, the company dropped its bid recently.

Here’s more on the move from Amsterdam:

   
Heineken to acquire FEMSA Beer Business

Amsterdam 11 January 2010 – Heineken N.V. today announced it will create a major new platform for growth by acquiring the beer operations of Fomento Económico Mexicano, S.A.B. de C.V (“FEMSA”) via an all share transaction. Heineken will acquire FEMSA Cerveza, comprising 100% of FEMSA’s Mexican beer operations (including its US and other export business) and the remaining 83% of FEMSA’s Brazilian beer business that Heineken does not currently own. As a result of the Transaction, FEMSA will hold a 20% economic interest in the Heineken Group (with shareholdings at both Heineken and Heineken Holding N.V.).

The acquisition delivers compelling strategic benefits globally and transforms Heineken’s presence in the Americas. In particular it:

-- provides a unique opportunity to drive growth in three of the world’s four biggest beer profit pools by: accessing both value and volume growth in Mexico, the world’s fourth largest beer profit pool; strengthening Heineken’s leading position in the highly profitable import and growing Hispanic segments in the USA, the world’s most profitable beer market; and providing the opportunity to build value in Brazil, the world’s second largest beer profit pool;

-- offers significant scope to accelerate the growth of the Heineken brand in the premium segment in both Mexico and Brazil using FEMSA Cerveza’s established route to market;

-- strengthens Heineken’s leading international portfolio with the addition of the Dos Equis, Tecate and Sol brands;

-- gives Heineken access to strong revenues and cashflows, consolidating its position as the world’s second largest brewer by revenue (€16.7 billion); and

-- further builds Heineken’s exposure to growth from developing markets.

Commenting on the Transaction, Jean-François van Boxmeer, Chairman and Chief Executive of Heineken, said:

“This is a compelling and significant development for Heineken. It transforms our future in the Americas and marks the next stage in Heineken’s strong association with FEMSA. Through this deal we become a much stronger, more competitive player in Latin America, one of the world’s most profitable and fastest growing beer markets. The acquisition strengthens considerably our position within the global beer market, expands our portfolio of leading international brands and enhances our leading position in the US import market. I am confident that this transaction will generate considerable future value for stakeholders in both groups."

Commenting on the Transaction, José Antonio Fernández Carbajal, Chairman of the Board and CEO of FEMSA said:

“We are enthusiastic about this transaction, which allows FEMSA’s beer operations to become an integral part of Heineken’s leading global platform. 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. Heineken presented us with the most compelling opportunity to transform our brewing assets. It enables us to unlock the significant value that we have created during the past decade, while also allowing our shareholders, through our significant stake in Heineken, to participate in the long-term value creation we believe will come from aligning FEMSA Cerveza with Heineken. At the same time, this transaction increases FEMSA’s operational and financial flexibility, allowing us to focus our attention and resources on the significant growth opportunities for Coca-Cola FEMSA and OXXO”.

Visit Heineken.com for more information.