In a strategic move to fuel its expansion initiatives, the Mexican beverage and retail group FEMSA has effectively divested its stake in the Heineken Co., allowing for capital to be freed up.
In a significant transaction, FEMSA has divested its joint ownership of shares in Heineken Holding and Heineken NV, generating €3.6 billion ($3.8 billion) in proceeds. The shares sold represented a 6.2% stake in Heineken Holding with a value of €1 billion, and a 5.1% stake in Heineken NV valued at €2.6 billion.
After conducting an internal strategic review, FEMSA made the decision to divest its stakes in Heineken Holding and Heineken NV. This share sell-off was a direct result of the review’s findings and subsequent strategic considerations.
With a clear focus on its “core business verticals,” FEMSA has articulated its strategic intent to prioritize its South American retail units, including OXXO, as well as its bottling operation Coca-Cola FEMSA, which handles The Coca-Cola Co. products. This decision reflects FEMSA’s commitment to strengthening and expanding these key areas of its business.
As part of the transaction, The Heineken Co. has purchased €235 million worth of the issued stock in Heineken NV, while also acquiring a stake in Heineken Holding for €98 million. Furthermore, the controlling family of Heineken and the corporate entity L’Arche Green have acquired €98 million worth of the offered shares in Heineken Holding.
In a note to investors Heineken said, “Heineken will fund the share purchase from existing cash resources and credit facilities. The impact on Heineken’s net debt / EBITDA (beia) ratio is expected to be minimal and will be earnings-per-share accretive. Heineken intends to keep the purchased Heineken shares in treasury and the purchased Heineken Holding NV shares on its balance sheet.
“Heineken Holding NV’s position as controlling shareholder in Heineken will not be affected,” it added.
Also investing in Heineken was tech giant Bill Gates, who made a strategic move by purchasing €10.8 million worth of shares. This investment allowed Gates to acquire a 3.76% stake in the Dutch brewer, solidifying his presence among the company’s esteemed shareholders.
Adding to Heineken’s roster of significant shareholders was FEMSA, the Mexican retail group. FEMSA held the position of the Heineken group’s second-largest shareholder, boasting a 12.2% stake in Heineken Holding NV. Additionally, FEMSA possessed an 8.6% stake in Heineken NV, resulting in a cumulative 15% stake in Heineken as a whole. The total value of FEMSA’s shares in the Dutch brewer reached €7.5 billion in the previous year. However, in February, FEMSA unveiled its plans to divest its 15% stake in Heineken, having already sold a portion of its shares back to the company beforehand.
FEMSA’s initial investment in Heineken occurred as part of a significant agreement between the two companies in 2010. This deal involved the acquisition of FEMSA’s beer business by Heineken, which also included a 20% stake in the Dutch brewer. However, in 2017, FEMSA made the decision to reduce its ownership stake by 5%, adjusting its involvement in Heineken accordingly.
According to a recent analyst note by Bernstein, the share buyback conducted this week has alleviated any lingering concerns. The note acknowledges that some critics may interpret FEMSA’s decision to sell as a cautious move related to potential issues in Vietnam. However, Bernstein offers a counterpoint, highlighting the family’s active participation in the buyback and their continued presence on the board, distinguishing them from FEMSA. Nonetheless, there remains a lingering sense of unease regarding NV’s cross shareholding in Holding, estimated to be around 1.8% of Holding’s shares.
“Some investors will perceive this as a breach of governance with NV shareholders helping out Holding shareholders (and implicitly the controlling family). We think these fears are over done, as Heineken has stressed that these shares could be used as part payment for future M&A. And in extremis, we believe Heineken could offer a scrip dividend of the Holding shares to all shareholders as an alternative to the final cash dividend.”
Heineken’s position in Vietnam had raised some concerns due to the intensifying competition within the premium beer market. With ThaiBev, holding a stake in the domestic leader Sabeco, alongside Heineken and Carlsberg, the battle for market share has become increasingly competitive in Vietnam.