Financial thoughts

Dutch brewer Heineken NV said Monday that it will buy the beer-making operations of Mexico’s Femsa in an all-share deal that values the maker of Dos Equis, Tecate and Sol beers at $5.5 billion, excluding debt.

The buy increases Heineken’s presence in growth markets and cements its position as the world’s second-largest brewer by sales. It also continues a decadelong trend toward concentration among the biggest players in the global beer market. Heineken is based in Amsterdam, Netherlands.

Femsa Cerveza brands have a 43 percent market share in Mexico and a 9 percent share in Brazil — two of the world’s top four most profitable beer markets, and both still fast-growing. Femsa’s Tecate and Dos Equis brands are also significant players in the U.S. imported beer market, where Heineken vies with Grupo Modelo’s Corona.

"This is a really good deal for Heineken, for our position in the Americas," Heineken Chief Executive Jean-Francois van Boxmeer said on a conference call. "As a worldwide brewer, this was a (region) where we perhaps were weaker."

Femsa Cerveza had sales of $3.8 billion in 2008, Heineken said. Including debt that Heineken will assume, the deal is worth $7.6 billion (euro5.3 billion).

Analysts welcomed the buy as a pleasant surprise, given that many had expected SABMiller PLC — now the world’s third-largest brewer by sales behind Anheuser-Busch InBev SA and Heineken — to win the race for Femsa.

Analyst Kris Kippers of Petercam Bank praised the deal as a "a great acquisition for Heineken" because Femsa was one of the few remaining large independent brewers in growth markets — and Heineken didn’t overpay. Heineken now has 40 percent of its operations in developing markets, up from 32 percent.

Femsa, or Fomento Economico Mexicano S.A.B. de CV, is based in Monterrey, Mexico. It is one of Mexico’s largest conglomerates, bottling Coca Cola and operating the Oxxo convenience store chain throughout much of Latin America, among other activities.

"In the context of the reconfiguration of the global brewing landscape, scale and geographic diversification are more important than ever," said Femsa CEO Jose Antonio Fernandez Carbajal on Monday.

"This transaction responds to that imperative."

Heineken said it expects the deal to close in the second quarter, pending approval from regulators and shareholders.

Heineken’s unusual holding structure allows descendants of the Heineken family to control Heineken NV, and the company said Monday they have agreed to the deal. A trust holding 39 percent of Femsa shares has also agreed, Heineken said.

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