Wednesday, August 17

Mexico’s Femsa announces $1.15 bln takeover of Swiss chain Valora


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ZURICH/VIENNA — Fomento Economico Mexicano on Tuesday unveiled a 1.1 billion Swiss francs ($1.15 billion) cash takeover of Swiss kiosk operator Valora , but shares of the Mexican soft drink bottler and retailer fell on concerns the price was too high.

The takeover offer, which Valora’s board and its largest shareholder are backing, is Femsa’s first major acquisition outside of Latin America. Femsa, whose Oxxo convenience stores are ubiquitous in Mexico, controls Coca-Cola Femsa, the world’s top bottler of Coca-Cola products , and is also the No. 2 shareholder in Dutch brewery Heineken.

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Femsa Chief Executive Officer Daniel Rodriguez said in a conference call on Tuesday that the company sees Valora as “an entrance gate to Europe.”

The Femsa offer includes plans to speed up growth in Switzerland, Germany and other European countries where Valora operates convenience stores and food service, Valora said.

That could include both organic growth and acquisitions, Rodriguez said.

“We see that there could be more acquisitions that we could implement going forward,” using the Swiss retailer as a base, he said.

Femsa, which had total sales of more than $27 billion last year, made an offer of 260.00 francs per Valora share, a premium of 52% to the Swiss firm’s last closing share price, Valora said in a statement.

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Valora said its board has recommended that shareholders accept the offer. The company’s largest shareholder, Ernst Peter Ditsch, is backing the deal. Ditsch had a 16.91% stake as of July 4, according to Refinitiv data.

Valora’s shares traded 50% higher at 256.50 Swiss francs shortly after the market opened on Tuesday and were up 51% in late morning trading. But Femsa shares were down more than 5.4%.

“The market is reacting negatively to the steep premium Femsa is willing to pay for Valora’s shares,” said Marco Montanez, an analyst with Mexican brokerage Vector, although he added that it could bring advantages such as operating in a region with political stability and potentially “some kind of commercial synergy with Heineken.”

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Analysts noted that the Swiss company had been seen as a possible takeover target for major Swiss grocery retailers Migros and Coop, meaning a rival bid should not be excluded.

Femsa’s Rodriguez ruled out raising the company’s offer to compete with a rival bid. Valora executives said they had not talked to any other potential bidders but would be obliged to consider any counteroffers.

Femsa, which had been aggressively expanding its Oxxo stores in Brazil, had been “looking for opportunities in mature markets,” Rodriguez said on the call.

The company also looked at potential US acquisitions, but such a move had become “very expensive” after recent deals, he said.

Credit Suisse is advising Femsa and is its offer manager, while JP Morgan is advising Valora on the deal.

The transaction is to be funded with Femsa’s available cash on hand, the two companies said. The offer, which remains subjected to regulatory approval, is expected to close in end-September or early October.

($1 = 0.9600 Swiss francs) (Reporting by Brenna Hughes Neghaiwi; Additional reporting by Valentine Hilaire; Editing by Arun Koyyur, Michael Shields, Jane Merriman and Paul Simao)

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