LatinFinance - July/August 2014 - 25

(primarily in Latin America) Coca-Cola
Femsa is now the biggest bottler of CocaCola products in the world.
In developed markets, Coca-Cola is
more likely to be sold primarily through
supermarkets rather than small familyowned convenience stores - one reason for
the firm to concentrate on Latin America
and emerging markets (rather than the
US, for example). "We see our competitive
advantage in emerging markets," says
Alfredo Fernandez, director of financial
planning and investor relations.
One analyst covering the stock calls
its acquisition strategy as "absolutely
amazing".
Fernandez says the firm is constantly
in contact with the owners of different
bottling franchises, speaking to them about
the possibility of merging. Indeed, the firm
has an in-house team of experienced M&A
professionals, supported where necessary
by external tax or legal advisors. "We have a
proactive M&A effort," says Fernandez.
Once a transaction is agreed, a further
team is put together to work with the team
that agreed with the transaction, in order
to perform due diligence and confirm
previously identified synergies. The firm

ALFREDO FERNANDEZ,
COCA-COLA FEMSA

"IN BRAZIL WE HAVE
THE OPPORTUNITY
TO BE AN IMPORTANT
CONSOLIDATOR"
then puts together an integration plan,
which includes ways to bring its expertise to
the newly acquired firm, as well as bring in
talent from the acquired firm at group level.
Partly thanks to a string of international
acquisitions dating back to 1994 which
continued into the 2000s, Coca-Cola
Femsa already distributes in Mexico,
Central America, Colombia, Venezuela,
and Argentina. But the most recent regional
acquisitions were in Brazil - like Mexico,
another of the top five markets for CocaCola worldwide, according to Coca-Cola
Femsa.
These latest buyouts both closed in the
latter part of 2013: Companhia Fluminense
de Refrigerantes, for $448 million,
linking São Paulo and Minas Gerais state
franchises, and secondly a $1.86 billion

acquisition of Spaipa Industria Brasileira de
Bebidas, linking its Mato Grosso do Sul and
São Paulo franchises.
Thanks to these acquisitions, which
increase Coca-Cola Femsa's production
volumes in Brazil by 55%, the firm's
operations now reach more than 72 million
people in Brazil - more than the company's
reach in its home market. The firm expects
to benefit from almost two-thirds of Ebitdalevel synergies estimated at $52 million in
a year.
Although Fernandez says the firm paid
slightly higher multiples for the acquisitions
compared to previous purchases, fiscal
incentives for foreign direct investors
in Brazil allow the firm to offset some of
this cost. The firm also strengthens its
geostrategic position in the country's
central area, which positions it well for
potential future acquisitions in the country,
according to Fernandez.
"In Brazil we have the opportunity
to be an important consolidator," says
Fernandez.
Femsa's treasury team lined up $2
billion in financing from Mexican and
international banks, swapped into reais,
including a $1.5 billion syndicated loan. The

July/August 2014 - L ATINFINA NCE.COM 25
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LatinFinance - July/August 2014

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