Coca-Cola Femsa Expands With $700 Million Yoli PurchaseBrendan Case
Coca-Cola Femsa SAB, the largest bottler of the soft drink in Latin America, agreed to buy Grupo Yoli SA in a deal valued at 8.81 billion pesos ($700 million) to expand in southern Mexico.
Yoli will get about 42.4 million newly issued Class L shares valued at 180 pesos each, according to a statement from the companies yesterday. Coca-Cola Femsa, based in Mexico City, also will assume 1.01 billion pesos of debt.
The acquisition is Coca-Cola Femsa’s fourth of a family-owned Mexican bottler since June 2011 and adds business in the southern states of Guerrero and Oaxaca. Yoli, known for a lime-flavored drink popular in its home base of Acapulco, generated sales of more than 4 billion pesos in 2012.
Yoli is apt to add to earnings “almost from year one” Alan Alanis, an analyst at JPMorgan Chase & Co., wrote in a report today. “From a strategic, synergistic and accretive standpoint, this acquisition makes sense,” he wrote, saying that Coca-Cola Femsa’s “quest to consolidate the Coke bottler system in Mexico continues.”
Yoli has territories contiguous to those of Coca-Cola Femsa, which will cover 60 percent of the Mexican population after the deal closes, said Carlos Salazar, the acquirer’s chief executive officer.
Coca-Cola Femsa rose 1.2 percent to a record close of 199.94 pesos in Mexico City. The shares have gained 53 percent in the past 12 months.
Yoli had an estimated 814 million pesos in earnings before interest, taxes, depreciation and amortization, according to the statement. Founded in 1918 and a Coke bottler since 1938, the company sold about 99 million unit cases of beverages last year.
Coca-Cola Femsa’s sales climbed 20 percent in the third quarter of 2012 after closing three purchases of Mexican bottlers announced in 2011. Last month it agreed to buy a 51 percent stake in Coca-Cola Co.’s Philippines bottling unit from the Atlanta-based soft-drink company for $689 million, in its first deal outside Latin America.
“Alongside our intentions to create a global emerging-market footprint, we remain focused on the opportunities the Americas continue to present,” Salazar told analysts and investors on a conference call today. “Our combined scale will allow us to multiply strategic alliances with customers and suppliers.”
The Yoli acquisition is subject to approval by Mexico’s antitrust authority and by Coca-Cola, which owns 29 percent of Coca-Cola Femsa. Fomento Economico Mexicano SAB, based in Monterrey, Mexico, owns 49 percent of the Mexican bottler.
The boards of Coca-Cola Femsa and Yoli have approved the accord and each will call a shareholder meeting to vote on it, according to the statement. The deal is expected to close in May, said Jose Castro, Coca-Cola Femsa’s head of investor relations.
The Yoli purchase is expected to generate 144 million pesos in “synergies” and “efficiencies” during the next 18 to 24 months, Coca-Cola Femsa Chief Financial Officer Hector Trevino said on the call. Coca-Cola Femsa will use existing cash to pay off the 1.01 billion pesos in assumed debt when the deal closes, Castro said.
Yoli has an attractive product mix, including a high percentage of profitable single-serve sales, Castro said. The company has two bottling plants, 20 distribution centers and almost 3,500 employees. In addition to Acapulco, its territory includes the resort towns of Ixtapa and Zihuatanejo.
Coca-Cola Femsa in the transaction also will get a 10 percent stake in Promotora Industrial Azucarera SA, bringing its holdings in the sugar producer to 36 percent.
Yoli received financial advice from Proyectos Financieros Especializados SC and legal counsel from Creel, Garcia-Cuellar, Aiza & Enriquez. Coca-Cola Femsa’s advisers were Deloitte Galaz, Yamazaki, Ruiz Urquiza SC on finances and Raz Guzman Abogados on legal issues.