Coca-Cola Femsa in talks for control of Philippines bottler

Coca-Cola Femsa SAB, the largest publicly traded Coke bottler, is in talks to buy control of the Coca-Cola Co’s unit in the Philippines in what would be its first acquisition outside Latin America.

The companies entered a 12-month exclusive agreement for the purchase of a controlling stake, Mexico City-based Coca-Cola Femsa said in a statement distributed today by Marketwire. There is no guarantee a transaction will result from the discussions, the companies said.

Coca-Cola Femsa, which sells soft drinks in nine Latin American countries, last year used at least 24.5 billion pesos ($1.9bn) of new stock to acquire three Mexican companies and add bottling rights. Atlanta-based Coca-Cola Co, the world’s biggest soft-drink maker, has owned all of the Philippines unit since buying the 65 per cent stake owned by San Miguel Corp in 2007 for $590 million.

Coca-Cola Femsa’s “expertise and successful track record operating in fragmented markets and emerging economies can be effectively deployed in this territory,” the companies said.

The Mexican company is Latin America’s biggest soft drink producer, with 35 bottling plants supplying 1.7 million retailers in the region it said.

Coca Femsa shares rose 1.7 per cent to 129.81 pesos in Mexico City trading today prior to the announcement. The shares have risen 41 per cent in the last year, compared with a 2.8 per cent advance by Mexico’s benchmark IPC stock index.

Coca-Cola Co shares have increased 7 per cent in the last 12 months, closing at $69.05 on February 17. US trading was closed today due to a holiday.

Coca-Cola Femsa is 54 per cent owned by Fomento Economico Mexicano SAB and the Coca-Cola Co has a 32 per cent stake, according to its website.

The Bill & Melinda Gates Foundation and Cascade Investment LLC, which manages money for billionaire Gates, own more than 21 per cent of Coca-Cola Femsa’s American depositary receipts, according to data compiled by Bloomberg.

In addition to its home market, Coca-Cola Femsa has rights to sell Coke, Sprite and Fanta in parts of Guatemala, Colombia, Panama, Brazil, Nicaragua, Costa Rica, Venezuela and Argentina.

Carolina Alvear, a spokeswoman for Coca Femsa, said the company did not immediately have additional comments. Press officials at Coca-Cola Co in Atlanta didn’t immediately respond to voicemails left on the US holiday.

Coca Femsa used stock in 2011 to buy the beverage unit of Grupo Fomento Queretano for 6.6bn pesos and 11bn pesos for the bottling operations of Grupo Cimsa. The company also paid 6.55bn pesos for the Coke division of Grupo Tampico SA.

The bottler expects as much as 2.7bn pesos in cash flow from the acquisitions, Chief Financial Officer Hector Trevino said in December 15 phone interview.

Coca-Cola Femsa has also expanded beyond carbonated beverages.

In March, the company completed the purchase of Grupo Industrias Lacteas, a Panama milk producer, for an undisclosed amount. The milk company had 2010 sales of $140.9m, Coca- Cola Femsa said at the time. The transaction was the first acquisition outside Mexico in a sector different than soft drinks, according to the company.