Arca, Contal Agree to Merger

Mexican bottling companies Embotelladoras Arca and Grupo Continental have announced a $2.3bn merger. Grupo Continental shareholders will receive 0.625 shares of new Arca stock for each share of Continental they hold. That price is slightly below the MXP37.69 at which Continental closed Monday. Arca was trading at around MXP59.0 per share Monday, yielding a deal value of MXP36.9 per share for Continental. With trailing 12 month Ebitda of MXP2.6bn ($216m) according to Capital IQ, the deal implies an acquisition multiple of 10.6x Ebitda. Arca will issue 468.75m in new shares to acquire Continental. Shares of the new company will be traded on the Mexican bolsa under a new ticker symbol. Estructura Partners advised Arca, while HSBC advised Contal. Arca is Mexico’s second largest Coca-Cola bottler. The deal must still receive final approval from the Coca-Cola Company.