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 and launched a $3.7 billion stock and equity-linked sale for part of its holdings.
(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 and launched a $3.7 billion stock and equity-linked sale for part of its holdings.
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 nearly 15% 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 over the next 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.
Femsa said later Thursday during US trading hours that it is selling a 6% stake in Heineken worth €3 billion, with the remaining €500 million expected to stem from a sale of senior unsecured bonds exchangeable into Heineken shares. The brewer could take up as much as €1 billion of the shares on offer. L’Arche Green NV, the entity through which the Heineken family exercises control of Heineken Holding NV, is also expected to participate in the equity offering.
Read more: Femsa to Offer About EU3.5B Heineken Shrs, Convertible Bonds
Heineken’s US-traded shares erased gains and fell as much as 2.6% after news of the accelerated offer. Femsa’s American depositary receipts shares climbed over 10% 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.
Investors will have the opportunity to acquire shares in either Heineken NV or Heineken Holding NV through the accelerated offering, and Femsa will adjust the relative split between the two companies depending on demand, Femsa said in a statement on Thursday.
The equity-linked bonds will have a maturity of three years and are expected to pay between 2.375% and 2.875% in annual interest, with an exchange premium of 25%-30% above the clearing price in the simultaneous equity offering.
The share sale and bond offering had received enough investor demand to cover the securities on offer within minutes of being put on the market, according to terms seen by Bloomberg.
Barclays Plc is advising Femsa, while Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley are joint bookrunners.
Cash to Spend
Scotiabank’s Maya said the divestments could translate into $9.4 billion that Femsa 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.
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.
–With assistance from James Cone, Sarah Jacob and Matt Turner.
(Adds details of Femsa’s accelerated offer throughout)
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