Dear Client:
Heineken’s all-stock purchase of FEMSA’s Mexican beer business five years ago awarded the Mexican conglomerate with a 20% stake, making it Heineken’s second largest shareholder. Due to a lock-up on the stake, FEMSA has been unable to touch their shares but that hold expired at the end of April. What’s next? (You may be asking, who cares? But as you should know by now, what happens in the global beer business affects the U.S. beer business eventually. So, yes, it matters).
In 2010 the deal was worth about $5.7 billion but that amount has ballooned to about $9 billion with Heineken’s stock more than doubling over the past five years. The stake combined with FEMSA’s cash on hand gives the beverage and c-store company “more than $11 billion in ammunition for M&A,” per Bloomberg.
It’s not a foregone conclusion that FEMSA will go out shopping, but it is expected, according to USB AG analyst Lauren Torres. “Femsa doesn’t like to own things that they really can’t control,” she said. “If they could parlay it into something that could give them another round of great returns, because they know that there’s another opportunity out there, then they’re going to do it.”
But FEMSA’s CFO Daniel Alberto Rodriguez Cofre has downplayed the acquisitive nature Lauren alluded to. On April 30 (the expiration date), Daniel said in a conference call that the freeing up of the shares was “not lost on us.” He claimed that FEMSA has no plans to mess with the shares in the “short term” due to their “very strong balance sheet” and selling the shares is currently unnecessary. “Having said that, obviously, we always have the responsibility to look for alternatives and benchmark those alternatives with Heineken shares,” he said.
If FEMSA decides to put some of their shares up for sale, the stake would certainly generate a number of suitors, including Heineken itself. Recall that Heineken fell into the sights of SABMiller last year but SABMiller’s offer was rebuffed [see BBD 09-15-2015]. In order to ward off other major brewers from making similar attempts it may behoove Heineken to regain that stake from FEMSA.
But then again, I bet FEMSA keeps the stock until they need the cash, and even then they can borrow against it. Like they said, their balance sheet is pretty strong, they really don’t need any more cash to do deals.
A-B AND TILTED KILT RAISE MONEY FOR VETS
We’re not in the business of publishing feel-good puff pieces unless I have a crush on the PR person or it tugs at my heart. This one I felt compelled to include even though I’m not sure A-B is sending me any gift baskets over the holidays.
In honor of Memorial Day, Budweiser and Tilted Kilt are kicking off their 5th annual military fundraising program, “Here’s to Heroes,†May 25 – July 4. The fundraiser is designed to raise money for the Folds of Honor which seeks to provide educational scholarships to family members and dependents of fallen or injured soldiers.
‽We are thrilled to be involved in such an honorable campaign to give back to the service men and women and their families who have sacrificed so much so that we can enjoy our freedomâ€
For a six week period, guests are given an opportunity to purchase $1.00 or $5.00 paper dog tags to be personally customized and displayed on the pub walls. Additionally, for $10.00 guests can purchase collectable Tilted Kilt, Folds of Honor, Budweiser glassware in which all proceeds will benefit the Folds of Honor. /End of puff piece.
A VERY WET MEMORIAL DAY. PIPING ALL HANDS
Down here in Texas we were plagued with catastrophic floods over the Memorial Day weekend. Oklahoma and Colorado have also seen floods, I’ve heard. Not sure how that affects beer sales, but it’s probably not great unless there was a run on stores.
So let’s get a first read: How were your Memorial Day weekend sales in your neck of the woods? And was there any unusual pricing in your market? Send in confidence to your ol’ buddy Harry at hs@beernet.com or just reply to this email. Gracias. I hope you and yours had a safe and prosperous Memorial Day honoring our service veterans.
Until tomorrow, Harry
“If you don’t know where you are going, any road will take you there.”
– Lewis Carroll
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THE 2015 WINE & SPIRITS DAILY SUMMIT is taking place at The Phoenician resort in Scottsdale, AZ June 1-2, 2015. Learn more about the event and register here: http://www.winespiritsdaily.com/summit.php
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