By Amy Guthrie
MEXICO CITY -- Mexican soft drink bottler Coca-Cola Femsa SAB
(KOF, KOF.MX) would consider raising capital via a public share
offering should the need arise to finance future acquisitions,
including a possible franchise purchase in the U.S., Chief
Financial Officer Hector Trevino told analysts during a conference
call Tuesday.
Coca-Cola Femsa, the world's biggest independent bottler of
Coca-Cola Co. (KO) products, has been on a merger-and-acquisition
binge for the past two years, participating in nine deals both in
Mexico and as far afield as the Philippines as it seeks new avenues
for growth. Company executives signaled Tuesday that they remain
open to more purchases, with Mr. Trevino saying that Coca-Cola
Femsa still plans to analyze opportunities to acquire U.S. beverage
distribution rights as the Atlanta-based Coca-Cola Co. looks to
reduce direct control over its U.S. distribution.
After having snapped up several regional bottlers in its home
turf of Mexico in recent years, Coca-Cola Femsa began bulking its
Brazilian position over the summer with an all-cash, $448 million
purchase of Rio de Janeiro-based bottler Companhia Fluminense de
Refrigerantes. Then, this past weekend, the company announced a
$1.86 billion agreement to buy Brazilian bottler Spaipa S.A.
Industria Brasileira de Bebidas, the Mexican bottler's largest
acquisition since it entered Brazil around a decade ago via the
purchase of Panamerican Beverages Inc.'s sprawling Latin American
assets.
Coca-Cola Femsa's American Depositary shares rose 2.3% to
$122.73 on the New York Stock Exchange.
Coca-Cola Femsa plans to finance the Spaipa purchase via bank
loans, leaving it with a still-comfortable ratio of net debt to
earnings before interest, taxes, depreciation and amortization of
1.6-times. Mr. Trevino said the company contemplated offering
Spaipa shareholders stock in Coca-Cola Femsa as part of the deal,
as it has done in other recent acquisitions, and that this option
would be on the table for future transactions as well.
Taking the Spaipa deal into account, Coca-Cola Femsa Chief
Executive Carlos Salazar said the Mexico City-based company will
represent 39% of the Coca-Cola Co.'s volume in Brazil, and 14% of
the beverage giant's total worldwide sales.
"We are a very important partner" for the Coca-Cola Co., Mr.
Salazar said.
Analysts on the call Tuesday questioned the Spaipa deal's high
valuation relative to Coca-Cola Femsa's recent purchases in Mexico,
where profit margins are wider.
Mr. Trevino said the valuation reflects Brazil's potential,
since the country's lower per-capita consumption of beverages gives
the territory far more room to grow versus Mexico. Coca-Cola Co.
data shows per-capita consumption of Coca-Cola beverages, including
bottled water, at 745 U.S. 8 fluid ounce servings (about 176
liters) last year in Mexico versus 241 U.S. 8 fluid ounce portions
in Brazil.
The price tag also reflects Spaipa's importance within Brazil.
"This is a very, very important territory," Mr. Trevino said. "This
is THE territory in Brazil." The Spaipa franchise operates in more
than half of the state of Sao Paulo and the state of Parana, with
four bottling facilities and seven distribution centers serving
close to 17 million consumers.
Once complete, the purchase would expand Coca-Cola Femsa's reach
to 66 million Brazilian consumers, similar to the number of
Mexicans it serves. Combined, Credit Suisse estimates that
Coca-Cola Femsa, Chilean bottler Andina (AKOA, ANDINA-B.SN) and a
large Brazilian bottler called Solar control around 70% of the Coke
system in Brazil.
Write to Amy Guthrie at amy.guthrie@dowjones.com
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