In an attempt to boost its presence in the emerging market of Brazil, Coca-Cola FEMSA S.A.B. de C.V.’s (KOF - Snapshot Report) Brazilian subsidiary Spal Industria Brasileira de Bebidas S.A. ("Spal"), has inked an agreement to completely acquire Vonpar. The takeover deal has an aggregate enterprise value of R$3,578 million ($1.11 billion) and an approximate equity value of R$3,508 million. The stock rallied almost 2% when the news was announced on Sep 23, 2016 on optimistic investor spirit.
Vonpar, the largest privately owned bottlers in the Brazilian Coca-Cola system has significant presence in the state of Paraná, in the south of Brazil, which perfectly complements Coca Cola Femsa’s operations in the region. The combined entity will allow Coca Cola Femsa, the largest Latin American bottler of The Coca Cola Company (KO - Analyst Report) to serve approximately 43% of the country’s population including the 15 million consumers whom Vonpar currently serves.
The takeover will also boost the total volume of bottles sold in Brazil by 25%. The takeover will also add three bottling facilities and five distribution centers employing 4,000 employees in the states of Rio Grande do Sul and Santa Catarina where Vonpar currently operates.
Coca Cola Femsa expects to attain almost R$65 million at the EBITDA level within the next 18 to 24 months from this transaction. These synergies will result from reconfiguration of the logistic network, manufacturing optimization, efficiencies in administrative expenses and the implementation of Coca Cola Femsa's commercial practices.
As per Coca Cola Femsa, its Brazilian unit Spal will pay R$1.73 billion to Vonpar's owners as well as another R$688 million that will be converted into Coca-Cola Femsa shares. Spal will also issue R$1.09 billion in convertible three-year debt to Vonpar owners.
Coca Cola Femsa currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better ranked stocks in the same industry include Dr. Pepper Snapple Inc. (DPS - Analyst Report) and Primo Water Corporation (PRMW - Snapshot Report) . Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Dr, Pepper Snapple boasts of a long-term earnings growth of 9%. The company has seen solid upward earnings estimate in the last 60 days.
Prime Water Corporation has a long-term growth rate of 10%.
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