Sector News

Coca-Cola Femsa to buy Brazilian Coke bottler Vonpar

September 26, 2016
Consumer Packaged Goods

Mexican soft-drink bottler Coca-Cola Femsa SAB said Friday it has agreed to acquire Brazilian Coke bottler Vonpar, with which it will expand its size and reach in Latin America’s biggest economy.

Coca-Cola Femsa, the world’s largest public bottler of Coca-Cola products by volume, said its Brazilian unit Spal Industria Brasileira de Bebidas SA will pay around 3.5 billion Brazilian reals (US$1.08 billion) for Vonpar. It will use a mix of cash, equity and debt to make the acquisition.

Vonpar is one of the biggest privately held Coca-Cola bottlers in Brazil, and its area of coverage borders Coca-Cola Femsa’s existing territories in the south of the country, making a “perfect geographic fit,” the Mexican company said. It includes three bottling plants and five distribution centers.

The deal will boost Coca-Cola Femsa’s Brazilian sales volume by 25%, bringing it to almost half of the Coca-Cola system’s volume in the country. Vonpar sold 190 million unit cases of beverages in the 12 months ended June 30, including 23 million cases of beer, and generated revenue of 2.03 billion reals. A unit case equals 24 servings of eight fluid ounces.

Coca-Cola Femsa, already the largest Coke bottler in Latin America, said it foresees synergies in manufacturing, logistics and administrative expenses that will generate savings of 65 million reals in earnings before interest, taxes, depreciation and amortization.

“We are excited to continue consolidating our leadership position in Brazil,” Coca-Cola Femsa’s chief executive John Santa Maria said in a release.

Analysts at Barclays described the expansion as a strategic one that increases Coca-Cola Femsa’s footprint in Brazil, “a region where despite macroeconomic headwinds, the company has been gaining market share.”

“We believe due to the geographic proximity of the acquired assets the company will be able to extract synergies as announced in the coming two years,” they added in a note to investors.

The acquisition is unlikely to change other expansion options for Coca-Cola Femsa, which in July reached an understanding with The Coca-Cola Company to assess on a preferred basis Coke territories in the U.S., Latin America and elsewhere, Credit Suisse said in a report. “We believe the current deal does not eliminate the probability of any of these other targeted acquisitions.”

Coca-Cola Femsa shares were up 1.7% on the Mexican stock exchange Friday afternoon, and have risen 31% in the past 12 months.

By Anthony Harrup and Anne Steele

Source: Wall Street Journal

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