Heineken Acquires Femsa's Beer Business for $5.44 Billion

January 11, 2010 8:31 AM EST
In a continuing trend of consolidation in the beer business, Heineken agreed to purchase the beer sector of Femsa for 3.8 billion euros ($5.44 billion) in what was a surprising conclusion to an auction for the Mexican Brewer.

The analysts and industry insiders had expected Britain's SABMiller PLC to purchase the beer operations of Femsa, which is also known as foment Economico Mexicano.

In total, including the net debt and pension obligations, the value of Femsa in the all-share deal is at 5.3 billion euros.

The move will give Heineken a larger presence in the key emerging markets as analysts cite this as the reason for the company making this move. Heineken’s flagship brand has been struggling in the U.S., the world’s largest beer market, but the deal to buy Femsa will allow for a larger market share.

“This is a compelling and significant development for Heineken which will transform our future in the Americas, offering opportunities for accelerating sales in the rapidly growing markets of Brazil and Mexico,” Heineken CEO Jean Francois van Boxmeer said.

The Femsa sale could help the brewer improve its market share in Mexico, where it has steadily lost ground to larger rival Grupo Model SAB in the past two decades.

The move will make Femsa the second largest shareholder of Heineken with a 20 percent total stake and will have the opportunity to appoint two nonexecutive representatives to the company’s board with one being appointed to the board of directors of Heineken Holding.

Smaller beer companies have had to find larger homes in a beer market that has seen a wave of consolidation that hit its peak with the $52 billion dollar deal of InBev buying Anheuser-Busch Cos in November 2008.

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