Fomento Economico Mexicano SAB jumped by the most in more than two years on Thursday after the Mexican Coca-Cola bottler and convenience store operator said it has decided to sell its stake Heineken NV over the coming years.
(Bloomberg) — Fomento Economico Mexicano SAB jumped by the most in more than two years on Thursday after the Mexican Coca-Cola bottler and convenience store operator said it has decided to sell its stake Heineken NV over the coming years.
Femsa, as the company is known, announced the plan late Wednesday, saying it resulted from a strategic review to shore up its share price. The stake is currently worth about €7.3 billion ($7.8 billion), according to analysts at Jefferies. The Dutch brewer said it may buy some of the stock that Femsa plans to sell in the next 24 to 36 months.
“These options dramatically change FEMSA’s investment thesis and the concept the market had formed of the company throughout the years,” Scotiabank analyst Hector Maya said in a note.
Heineken US-traded shares were little changed, while shares in Amsterdam wiped out a slide. Femsa’s US-traded shares jumped more than 6% in their biggest intraday gain since November 2020 as investors welcomed the plan that will include exiting other business not related to its core businesses over the coming years.
Maya said all the divestments could translate into $9.4 billion that the company could plow into dividends, invest in its growing digital financial services businesses that are anchored to its stores or acquire a US convenience chain.
Femsa is the largest convenience retailer in Latin America and operates about 20,000 stores and more than 3,600 pharmacies across the region. The Mexican group picked up a 20% stake in Heineken in 2010 but trimmed it to 14.8% in a €2.5-billion transaction in 2017.
Femsa’s Chief Executive Officer Daniel Rodriguez Cofre said the company is now convinced that the best way to continue creating value is “through a structure that focuses solely on the businesses that are core to us.” Last year Femsa struck a deal to buy Switzerland’s Valora, which operates about 2,700 cafes and convenience stores, for as much as $1.2 billion to push into Europe.
The Mexican group’s holding in Heineken is split between two entities, Heineken NV and its holding company. Representatives of Femsa will resign from Heineken’s supervisory board and Heineken Holding NV’s board of directors.
“Uncertainty around the timing of the placing creates a short-term overhang for the shares,” Edward Mundy, an analyst at Jefferies, said in a note to clients. “If Heineken was to participate in the placing, this would remove the overhang and send a message that the board views the shares as undervalued.”
Femsa’s decision to sell its stake in Heineken had been widely anticipated, said James Edwardes Jones, an analyst at RBC Capital Markets.
“This is not helpful for the Heineken share price, but should not be more than a temporary blip,” he said in the note. “It sounds like Heineken feels it has the wherewithal to buy back some or all of Femsa’s stake.”
On Wednesday, Heineken, the world’s second-largest brewer, said beer volumes rose 6.9% on an organic basis in 2022, just above the average analyst estimate, as drinkers remained resilient despite higher prices. The company said organic operating profit will grow by mid-to-high single-digits this year.
–With assistance from James Cone.
(Updates Femsa share move and adds analyst comment)
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