Heineken buys Femsa for $7.7 billion

Heineken, who wants to expand its operations in Latin America, will increase its base in Mexico with the help of the purchase.

“Through this deal we become a much stronger, more competitive player in Latin America, one of the world’s 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 U.S. import market,” said Heineken Chairman and CEO Jean-Francois van Boxmeer.

Heineken’s shares rose by 6.2 percent in Amsterdam trading Monday, the highest so far since Aug. 26 2009.

The deal
The brewing firm will issue 86 million new shares to Femsa along with an additional 29 million within five years of the deal. Heineken expects to increase its earnings before interest, taxes, depreciation and amortization from 28 percent to 40 percent.

The transaction is to be closed by the second quarter of 2010. Heineken will keep its debt to equity ratio unchanged in the whole process.

The deal will give Heineken the right to appoint two non-executive representatives to its board, out of which one of them will be the Board of Director.

Heineken Chief Financial Officer Rene Hooft Graafland said the structure of the deal was at Femsa's request as the Mexico based company wanted to diversify its business with the help of a major brewer.

Femsa, based in Monterrey, will be holding a 20 percent stake in the Heineken Group. Out of the 20 percent, 12.5 percent will be of Heineken NV and 14.9 percent of Heineken Holding.

Heineken’s presence in 65 countries
Heineken, which is owned by Charlene de Carvalho-Heineken, possesses 119 breweries in more than 65 countries.

It sells more than 170 international premiums, regional, local and specialty beers with an annual beer production of 139.2 million hectoliters.

It is also ranked as the third largest brewer in the world after Anheuser Busch InBev and SABMiller.

Charlene, who inherited stake in the company after her father, is ranked as the second-richest person in Netherlands.