The Dutch brewer Heineken has bought the beer unit of Mexican drinks giant Femsa in a deal valued at Ôé¼5.3 billion.
The acquisition will allow Amsterdam-based Heineken, currently the worldÔÇÖs number three brewer by sales volume, to tap faster sales growth in the Latin American market.
Heineken, which distributes Femsa beers including Dos Equis in the US, expects to realise savings of Ôé¼150 million a year by 2013 and said it will use the acquisition to sell Femsa brands in Europe and Heineken in Latin America.
Femsa, whose brands include Sol, Tecate and Dos Equis, will receive a 20 per cent stake in Heineken as part of the deal. The company has six breweries in Mexico and eight in Brazil.
The deal will make Heineken the number two brewer in Mexico, as well as boosting its presence in Brazil and the US. In 2008, FemsaÔÇÖs beer unit had 43 per cent market share in Mexico by volume.
However, Femsa had recently been losing ground in Mexico to rival Grupo Modelo, the producer of Corona.
Femsa had beer sales of about $2.8 billion (Ôé¼1.9 billion) in 2008, of which $2.1 billion (Ôé¼1.4 billion) was generated by the Mexican market and the rest by its Brazilian operations and exports, largely to the US.
Heineken now plans to focus on increasing its revenue and profit rather than trying to boost sales volumes. It also plans to ramp up brand awareness of Heineken, which currently has a low volume of sales in Latin America.
As part of the deal, the Dutch firm has secured a 10-year exclusivity agreement with Femsa that allows it to sell beer in Femsa's Oxxo, Mexico's largest chain of convenience stores.
Jean-Fran├ºois van Boxmeer, chairman and CEO of Heineken, called the deal a ÔÇ£compelling and significant development for Heineken.ÔÇØ
He added: ÔÇ£Through this deal we become a much stronger, more competitive player in Latin America, one of the worldÔÇÖs 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.ÔÇØ
Jos├® Antonio Fern├índez Carbajal, chairman and CEO of Femsa added: ÔÇ£We are enthusiastic about this transaction, which allows FemsaÔÇÖs beer operations to become an integral part of HeinekenÔÇÖs leading global platform.
ÔÇ£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.ÔÇØ
As beer consumption in western Europe has slowed, the worldÔÇÖs biggest brewers have set their sights on markets outside that region. Interbrew, the predecessor to the worldÔÇÖs number one brewer, Anheuser-Busch InBev, bought Companhia de Bebidas das Americas in 2004 to become Latin AmericaÔÇÖs biggest beer maker.
In 2005, SABMiller expanded its footprint in Colombia following its acquisition of Bavaria BreweryÔÇöformally the second largest brewer in Latin America.
SABMiller reportedly pulled out of the bidding for FemsaÔÇÖs beer unit after deciding that it wasnÔÇÖt worth more than $7 billion (approximately Ôé¼4.8 billion).
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