Femsa Weighs M&A, Bond Buyback

Femsa is weighing its spending options as it is poised receive some $700m in cash from Heineken, according to Gerardo Estrada, corporate finance director at Femsa. The cash payout is part of a $7.6bn deal announced last month whereby Femsa is swapping its beer unit for a 20% stake in the European brewer. Heineken agreed to assume $2.1bn in debt issued by Femsa Cereveza and is transferring Femsa the $700m so it can have the option to repurchase some MXP7.5bn in certificados bursatiles that had been passed down to the Cerveza unit from the parent company. But the executive says Femsa may elect to spend the money in other ways, including M&A. “We will have more cash [on hand] than debt, and we will have to decide what to do with the proceeds we are receiving,” Estrada tells LatinFinance. “Absent any alternative to invest it, we will consider a public offer to repurchase the Mexican bonds issued by the holding company.” As Femsa is a growth-oriented company, he explains, the preference is to use cash to make acquisitions as it focuses on expanding its Oxxo convenience store brand, and Coca-Cola Femsa, the bottler of which it owns 53.7%, he explains. In the absence of opportunities to expand in businesses complimentary to those areas, it will opt for the repurchase. Femsa canceled a new domestic bond it was roadshowing late last year when it became clear a deal with Heineken was likely. Estrada says the company will likely require less debt financing in the future than it did before the sale of Femsa Cerveza.