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Mexico’s Femsa to buy Swiss retailer Valora for $1.15 billion in European push
Global Banking & Finance Review®
Company
By Brenna Hughes Neghaiwi and Christian Plumb
ZURICH/VIENNA (Reuters) -Mexican soft drink bottler and retailer Fomento Economico Mexicano (Femsa) has offered to buy Swiss kiosk operator Valora in a 1.1 billion Swiss franc ($1.15 billion) cash deal, paving the way for European expansion.
The takeover offer is the first move beyond Latin America for Femsa, which is among the world’s top Coca-Cola bottlers and whose Oxxo convenience stores are ubiquitous in Mexico.
Femsa Chief Executive Daniel Rodriguez said in a conference call on Tuesday that the company sees Valora as “an entrance gate to Europe.”
The Femsa deal includes plans to speed up growth in Switzerland, Germany and other European countries where Valora operates convenience stores and food service, Valora said.
That could include both organic growth and acquisitions, Rodriguez said.
“We see that there could be more acquisitions that we could implement going forward,” using the Swiss retailer as a base, he said.
Femsa, which had total sales of more than $27 billion year, made an offer of 260.00 francs per share, a premium of 52% to Valora’s last closing share price, Valora said in a statement.
Valora said its board has recommended that shareholders accept the offer, which was supported by its largest individual shareholder with a roughly 17% stake.
Ernst Peter Ditsch is Valora’s largest shareholder, with a 16.91% stake as of July 4, based on Refinitiv data.
Ditsch became Valora’s largest shareholder when Valora acquired his family’s Ditsch/Brezelkönig pretzel vending firms in 2012, granting Ditsch 635,599 shares as part of that deal.
Valora’s shares traded 50% higher at 256.50 Swiss francs shortly after the market opened and were up 51% in late morning trading.
Zuercher Kantonalbank analyst Gian Marco Werro said: “As the largest convenience store chain in Mexico, FEMSA offers Valora good opportunities for pooling resources, expanding its network throughout Europe and exchanging know-how (digitalisation).”
Werro also said the Swiss company had been seen as a possible takeover target for major Swiss grocery retailers Migros and Coop and a counter bid should not be excluded.
Femsa CEO Rodriguez ruled out raising the company’s bid to compete with a rival. Valora executives said they had not talked to any other potential bidders but would be obliged to consider any counter offers.
Femsa, which had been aggressively expanding its Oxxo stores in Brazil, had been “looking for opportunities in mature markets,” Rodriguez said on the call.
The company also looked at potential U.S. acquisitions but it had become “very expensive” after some recent deals, he said.
Credit Suisse is advising Femsa and is its offer manager, while J.P. Morgan is advising Valora on the deal.
The transaction is to be funded with Femsa’s available cash on hand, the two companies said. The offer, which remains subjected to regulatory approval, is expected to close in end-September or early October.
($1 = 0.9600 Swiss francs)
(Reporting by Brenna Hughes Neghaiwi; Editing by Arun Koyyur, Michael Shields and Jane Merriman)
An acquisition is a corporate action in which one company purchases most or all of another company's shares to gain control. This can lead to increased market share and operational synergies.
Market expansion refers to the strategy of entering new markets to increase sales and reach new customers. This can involve geographical expansion or targeting new customer segments.
A shareholder is an individual or institution that owns shares in a company. Shareholders can benefit from dividends and capital appreciation and often have voting rights in company decisions.
A cash deal is a transaction where the buyer pays the seller in cash, rather than through financing or stock. This is often preferred for its simplicity and immediacy.
Organic growth refers to the growth of a company through increasing output and enhancing sales internally, as opposed to mergers or acquisitions.
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