Heineken To Buy Femsa Beer Business

Heineken has entered into an agreement with Latin American beverage company Fomento Economico Mexicano (Femsa) to buy Femsa Cerveza business unit in an all-share transaction that is valued at approximately $7.347bn based on closing prices of €32.92 for Heineken and €29.38 for Heineken Holding on January 8, 2010, including the assumed debt. The Dutch brewer will give Femsa a 20% economic interest in Heineken Group.

Under the terms of the agreement, FEMSA will receive 43,018,320 shares of Heineken Holding and 72,182,201 shares of Heineken of which 29,172,502 will be delivered pursuant to an allotted share delivery instrument. It is expected that the allotted shares will be acquired by Heineken in the secondary market for delivery to FEMSA over a term not to exceed five years.

Heineken also will assume $2.1bn of indebtedness including FEMSA Cerveza's unfunded pension obligations. The total transaction is valued at approximately $7.347bn based on closing prices of €32.92 for Heineken and €29.38 for Heineken Holding on January 8, 2010, including the assumed debt.

Jose Antonio Fernandez Carbajal, chairman of the board and chief executive officer of FEMSA, will join Heineken supervisory board as a vice chairman. Mr Fernandez will also serve as chairman of the newly-formed Americas Committee and will be a member of the Heineken Holding Board.

The transaction combines FEMSA Cerveza's beer brands, including Dos Equis, Sol and Tecate, with Heineken global platform and Premium brand portfolio, including Heineken, as well as Amstel, Birra Moretti and Cruzcampo. Heineken said that it will gain important market positions in Mexico and Brazil, further strengthening its worldwide footprint.

Under a long-standing agreement, Heineken currently distributes FEMSA Cerveza's beer brands in the US, and the two companies also share joint ownership of their beer operations in Brazil.

Mr Fernandez, chairman of the board and chief executive officer of FEMSA, said: We are enthusiastic about this transaction, which positions FEMSA's beer operations to become an integral part of Heineken's leading global platform. The transaction also allows our shareholders, through our significant stake in Heineken, to participate in the long-term value creation we believe will come from aligning FEMSA Cerveza with Heineken.

Jean-Francois van Boxmeer, chairman and chief executive of Heineken, said: This is a compelling and significant development for Heineken. It transforms our future in the Americas and marks the next stage in Heineken's strong association with FEMSA.

“The acquisition strengthens considerably our position within the global beer market, expands our portfolio of leading international brands and enhances our leading position in the US import market.”

The transaction, which is expected to be completed in the first half of 2010, is subject to customary regulatory approvals, as well as approval by FEMSA, Heineken and Heineken Holding shareholders.