NETHERLANDS – Heineken has bought €1 billion (US$1 billion) worth of shares from the Mexican Coca-Cola bottler and convenience store operator Fomento Economico Mexicano SAB(FEMSA).
The purchase comes after FEMSA launched a €3.7 billion (US$3.97bn) stock and equity-linked sale for part of its holdings in the Dutch group.
The world’s second-largest brewer said its strong balance sheet allowed it to carry out the buyback in a statement to newsrooms.
Dolf van den Brink, CEO and chairman of Heineken’s executive board, said: “Our strong balance sheet allows us to take advantage of this opportunity. This does not change our capital allocation principles, which prioritize investment in the organic growth and expansion of our business.”
A few days ago, FEMSA announced its plans of divesting the full shareholding in HEINEKEN and Heineken Holding N.V. to focus on core business verticals that have the highest strategic relevance, growth potential, and financial and competitive strength.
It was part of the review considered by the Board of Directors of FEMSA, in which the company will undertake a series of actions and divestitures conducive to achieving this strategic focus within the next 24 to 36 months.
The buyback is part of an accelerated book build offering by FEMSA of €1.9 billion (US$2.04bn) in shares in Heineken, priced at €91 (US$97.5) per share, and €1.3 billion in shares in Heineken Holding, at €75 apiece.
The Mexican bottler also placed a sale of exchangeable bonds for an amount of €500 million, exchangeable into Heineken Holding shares.
The bonds will have a maturity of three years and were priced at an annual coupon of 2.625% and a conversion premium of 27.5%, with the initial exchange price set at €95.625. FEMSA’s overall economic interest in the Heineken Group will decrease from 14.76% to 8.13%.
The move does not change Heineken’s capital allocation principles, which prioritize investment in the organic growth and expansion of the business, said Dolf van den Brink.
At the same time, FEMSA’s representatives will resign from Heineken’s Supervisory Board and Heineken Holding N.V.’s Board of Directors with immediate effect.
The stock buyback by Heineken sends a “strong message that the board views the shares as undervalued,” Jefferies analyst Edward Mundy said in a note to Bloomberg.
Additionally, Scotiabank analyst Hector Maya commented that the share sale “dramatically changes FEMSA’s investment thesis and the concept the market had formed of the company throughout the years.”
The divestments could be plowed into FEMSA’s dividends, invested into its growing digital financial services businesses that are anchored to its stores, or enable it to acquire a US convenience chain, Maya added.
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