Mexico: FEMSA to divest its 14.76% stake in Heineken

As part of a strategic review of its business, Fomento Económico Mexicano (FEMSA) announced today to focus “on its core business verticals which have the highest strategic relevance, growth potential, and financial and competitive strength”. This decision includes its intention to divest its full shareholding in Heineken and Heineken Holding N.V., while remaining in retail, Coca-Cola FEMSA and its digital business. The retail business consists mainly of the very profitable Oxxo stores, Mexico’s ubiquitous corner store chain and Coca-Cola FEMSA is the largest franchise bottler of Coca-Cola products in the world in terms of sales volume.

FEMSA currently holds a 14.76% stake in Heineken which makes it the largest shareholder in the world’s second largest brewing group after the Heineken family. The shareholdings stems from the sale of its brewing business to Heineken in 2010. In exchange FEMSA received 12.53% of Heineken NV and also 14.94% of Heineken Holding (parent company of Heineken NV), which represents an overall economic interest of 20% in the group. In 2017, FEMSA sold slightly more than 5% in Heineken to institutional investors outside of Mexico for about EUR 2.5bn (USD 3bn) thus reducing its economic interest in Heineken from 20.00% to 14.76%. (, 19.9.2017)

The newly announced plan will see a divesture of the remaining total 14.76% in Heineken and the sale of senior unsecured 3-year bonds of EUR 500 million exchangeable into Heineken shares. The bonds have a conversion premium of 27.5% with the initial exchange price set at EUR 95.625.

As a consequence of the planned divesture, FEMSA’s representatives will resign from Heineken’s Supervisory Board and Heineken Holding N.V.’s Board of Directors with immediate effect.

Other actions to be taken will include

  • to explore strategic alternatives for Envoy Solutions, a diversified distribution company for facility supplies, packaging solutions, foodservice disposables and specialty products in the United States, as well as for FEMSA’s other minority investment, and other non-core, non-strategic business units.
  • seek to reduce its existing debt to achieve a target leverage of approximately 2x Net Debt/EBITDA ex-KOF1, maintaining a solid investment grade credit rating.
  • to return capital in excess of that required for organic and inorganic growth in the core business verticals to FEMSA shareholders over time.

José Antonio Fernández Carbajal, FEMSA’s Executive Chairman of the Board, commented: “After thoroughly analyzing our business platforms, including their strategic opportunities, long-range plans, and the best strategy to continue to drive growth and allocate capital in the future, FEMSA’s Board of Directors has approved a series of decisive actions. Once completed, these actions will materially simplify FEMSA’s corporate structure, providing increased strategic clarity and focus. They will also allow us to return capital to our shareholders over time.”

Daniel Rodríguez Cofré, FEMSA’s Chief Executive Officer, commented:
“Following the definition and approval of FEMSA’s long-range plan, we are convinced that the best way to continue creating value at FEMSA is through a structure that focuses solely on the businesses that are core to us, where we have built leading platforms, and that have proven capabilities, financial strength, and dynamic avenues for growth. Just as importantly, we are providing the strategic framework, priorities, and capital structure parameters that will increase visibility into FEMSA for investors and market participants. We are confident that the FEMSA Forward vision presented today will position our company to create significant economic, social, and sustainable long-term value for all our shareholders.”

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