Mon, Sep 02, 2013 - Page 15 News List

Coca-Cola Femsa to buy Spaipa in US$1.86b deal

CAPPED:If the purchase is approved by antitrust authorities, Coca-Cola Femsa would account for 39 percent of the Coca-Cola’s volume in Brazil

Bloomberg

Coca-Cola Femsa SAB, the largest bottler of the beverage in Latin America, agreed to buy Brazil’s Spaipa SA Industria Brasileira de Bebidas in a cash deal with a total transaction value of US$1.86 billion.

The deal, Coca-Cola Femsa’s second acquisition in Brazil in less than three months, will bolster its volume in South America’s largest nation by 40 percent, the Mexico City-based bottler said in a statement on Saturday.

When the purchase closes, subject to approval by Brazil’s antitrust authority, the Mexican bottler said it would account for 39 percent of the Coca-Cola system’s volume in Brazil.

The Spaipa deal is Coca-Cola Femsa’s largest since it announced the US$3.6 billion acquisition of Miami-based Panamerican Beverages Inc, or Panamco, in 2002, according to data compiled by Bloomberg, and it follows a US$4 billion shopping spree in Mexico, Brazil and the Philippines started in June 2011.

The Spaipa acquisition provides a “perfect geographic fit,” Coca-Cola Femsa said in the statement, linking the Mexican bottler’s distribution territories in the states of Sao Paulo and Mato Grosso do Sul.

Spaipa, Brazil’s second-largest closely held Coca-Cola bottler, sold 236 million unit cases of beverages, including beer, last year, generating sales of US$929 million and US$152 million in earnings before interest, taxes, depreciation and amortization, a profit measure known as Ebitda, Coca-Cola Femsa said.

Regulatory changes and “a generally weak consumer environment” hurt Spaipa and Coca-Cola Femsa’s Brazil operations in recent quarters, according to the Mexican bottler.

Coca-Cola Femsa said it expected US$33 million in Ebitda gains from the transaction in the next 18 to 24 months, from transportation, reductions in administrative expenses and other measures. Spaipa has operations in the states of Sao Paulo and Parana, with four bottling plants, seven distribution centers and more than 6,000 employees serving almost 17 million consumers, Coca-Cola Femsa said.

The deal has been ratified by Coca-Cola Femsa’s board of directors and the company said it would also seek approval from Atlanta-based Coca-Cola Co.

Coca-Cola Femsa will finance the Spaipa purchase with new bank debt for which the Mexican company has already obtained commitments, it said. After the deal, the Coca-Cola Femsa’s net debt will be 1.6 times Ebitda, it said.

The bottler has a credit rating of “A-” from Standard & Poor’s, the seventh-highest investment grade level and four steps above junk.

The company announced its first foray into Asia this year as it bought a controlling stake in Coca-Cola’s Philippines bottling operation. It has acquired four Mexican bottlers since June 2011 and closed the US$448 million acquisition of Brazil’s Cia Fluminense de Refrigerantes last month.

Coca-Cola Femsa chief executive officer Carlos Salazar and chief financial officer Hector Trevino will hold a conference call to discuss the transaction tomorrow at 12pm in Mexico City.

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