Bloomberg News

Coca-Cola Femsa Targets Brazil Expansion With Fluminense Deal

June 29, 2013

Coca-Cola Femsa SAB (KOFL), the largest bottler of the soft drink in Latin America, agreed to buy Brazil’s Cia. Fluminense de Refrigerantes for $448 million in cash to expand in the region’s largest country.

The purchase will bolster Coca-Cola (KO:US) Femsa’s Brazilian business by linking two other areas it serves, clearing the way for “the reconfiguration of the supply chain of our combined operations,” Chief Executive Officer Carlos Salazar said yesterday in a statement.

The Fluminense deal caps a $4 billion acquisition spree in the past two years by Mexico City-based Coca-Cola Femsa, which also has purchased four Mexican bottlers and control of Coca-Cola Co.’s Philippines bottling operation. Fluminense, which was founded in 1949 in the state of Rio de Janeiro, posted sales of about $232 million in the year ending March 31, shipping 56.6 million unit cases of beverages, including beer.

“This acquisition highlights the long-term strategic importance of the Brazilian market for Coca-Cola Femsa as we believe in the attractive domestic consumption prospects and socio-economic dynamics,” Salazar said in the statement. “This transaction underscores our commitment to continue focusing on the opportunities that the Latin American Coca-Cola bottling system presents.”

Coca-Cola Femsa will seek to increase sales by offering a broader range of products, adding coolers at retailers and serving more points of sale, according to investor relations chief Jose Castro.

Beverage Breakdown

The deal is subject to approval by Brazil’s antitrust regulator, said Coca-Cola Femsa, which is controlled by Monterrey, Mexico-based Fomento Economico Mexicano SAB. (FEMSAUBD) The bottler also will seek approval from Atlanta-based Coca-Cola. The transaction is expected to close in the fourth quarter, Castro said, and is being funded with the company’s existing cash balances.

Fluminense had an estimated $40 million in consolidated earnings before interest, taxes, depreciation and amortization in the 12 months ended March 31, Coca-Cola Femsa said.

With one bottling plant and four distribution centers, it operates in parts of Sao Paulo, Rio de Janeiro and Minas Gerais states. Carbonated soft drinks make up 86 percent of its business, with 8 percent coming from beer, 5 percent from non-carbonated beverages and 1 percent from water, Castro said.

Coca-Cola Femsa sold 494.2 million unit cases last year in Brazil, up 1.8 percent from a year earlier, the company said Feb. 27.

To contact the reporter on this story: Brendan Case in Mexico City at bcase4@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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