Mexico-based Coca-Cola FEMSA S.A.B. de C.V. (KOF - Snapshot Report) has acquired its Brazilian peer Companhia Fluminense de Refrigerantes for $448 million in an all cash transaction. The deal, signed in Jun 2013, was approved by Coca-Cola FEMSA's board, the Brazilian antitrust authority and FEMSA’s franchise bottler The Coca-Cola Company (KO - Analyst Report).
Coca-Cola FEMSA is co-owned by the Coca Cola Company and Fomento Economico Mexicano S.A. (FMX - Analyst Report) – also known as FEMSA. It produces and distributes Coca-Cola, Fanta, Sprite, Del Valle and other trademark beverages of The Coca-Cola Company, bottled water, juices, teas, isotonics, beer and other beverages in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela, Brazil, Argentina and Philippines.
The deal extends Coca-Cola FEMSA’s reach in Latin America, a budding business hub. The takeover will strengthen the company’s supply chain in the Brazilian markets. Notably, among all other Latin American countries, Brazil is expected to lead the growth trajectory. Brazil is set to witness a surge in demand driven by decent economic growth and the resurgence of the middle class.
Coca-Cola FEMSA is on an acquisition spree and has been acquiring Coke bottlers in Mexico for the last two years. In January this year, the cola giant entered into a definitive agreement to acquire another Mexico-based Coca-Cola bottler Grupo Yoli, S.A. de C.V. for $700 million. The company is also expanding its operations beyond Latin America and has acquired a 51% interest in Coca-Cola Bottlers Philippines, Inc. during that time.
Beverage giants are fast expanding into emerging markets. Coca Cola’s peer Pepsico Inc. (PEP - Analyst Report) traded its bottling operations in China for a position in Tingyi Holding’s beverage business. Tingyi’s beverage subsidiary (Tingyi-Asahi Beverages Holding) will become Pepsi’s franchise bottler in China.
Currently, Coca-Cola FEMSA carries a Zacks Rank #3 (Hold).