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Acquisition Expands Coke Bottler’s Market Reach

Posted on the 11 October 2016 by Angelicolaw @AngelicoLaw

Coca‑Cola Femsa, the Coke bottling company based in Mexico, has developed a thirst for the Brazilian market. The company is set to expand its market share in Brazil with a deal to acquire Brazilian beverage maker Vonpar. The deal is valued at roughly $1.08 billion, the Wall Street Journal reported. With the deal, Femsa strengthens its presence in Latin America’s largest economy.

The acquisition is a combination of cash, stock, and debt. Femsa’s Brazilian division, Spal Indústria Brasileira de Bebidas S.A., will pay 1.73 billion reais to the owners of Vonpar and convert another 688 million reais into Femsa shares, Reuters reported. The Brazilian unit of Femsa will also issue 1.09 billion reais in convertible debt to the owners of Vonpar.

Femsa is the largest Coke bottler in Latin America and the world’s largest public bottler of Coke products by volume, the Journal noted. The deal still needs the approval of antitrust authorities, as well as the blessing of The Coca-Cola Company. But Femsa is no stranger to the Brazilian market, and it has won the blessing of regulatory authorities enforcing Brazilian antitrust law before. The Vonpar deal comes three years after two Femsa acquisitions expanded its reach in Brazil. In 2013, Femsa paid $1.86 billion to acquire Spaipa and $448 million for Fluminense de Refrigerantes, according to Bloomberg.

Femsa said that its own presence in the southern part of Brazil borders on the service territory covered by Vonpar, leading to what the companies described as a “perfect geographic fit.” Vonpar’s presence in Brazil includes three bottling plants and five distribution centers in the states of Rio Grande do Sul and Santa Catarina. The company said that its products reach more than 15 million consumers.

With Vonpar as part of its Brazilian operations, Femsa said that its volume of Coca-Cola sales will increase by 25 percent, making the company responsible for half of the volume of Coke sales in the country. The company also said that the business combination is expected to result in business savings of up to 65 million reais.

The investment community recognizes those expected synergies. Barclays analysts view the acquisition as a strategic one that allows Femsa to grow in Brazil despite economic challenges in the country, according to an investor note cited by the Journal. The deal making might not yet be over. Credit Suisse said in its own report that the Vonpar deal does not eliminate the possibility of other acquisitions.

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