Heineken Agrees to Buy Mexican Brewer

AMSTERDAM ( TheStreet) -- Heineken, the world's third-largest brewer, confirmed Monday it has reached an agreement to buy the beer business of Mexico's Fomento Economico Mexicano ( FMX) in a stock transaction.

In a statement on its Web site, Heineken said the implied equity value of Femsa Cerveza is $5.5 billion, based on Heineken's closing stock price on Jan. 8. Including net debt and pension obligations of $2.1 billion, the total implied enterprise value for Femsa Cerveza is about $7.6 billion.

The Wall Street Journal had reported earlier that Heineken was close to buying the Femsa beer unit for between $7.5 billion and $8 billion.

Most bankers, analysts and industry players following the auction had expected Britain's SABMiller, the world's second-largest brewer, to buy Femsa Cerveza. However, sources told the Journal that SABMiller had dropped out of the race just before Christmas.

Anheuser-Busch InBev ( BUD) is the world's top brewer.

Heineken has a small presence in emerging economies, unlike SABMiller which already has big operations in Latin America. Buying Monterrey-based Femsa would give Heineken a big role in a large and profitable emerging beer market and offset the slow-growing markets in Western Europe, the Journal notes.

Under terms of the transaction, Femsa will hold a 20% economic interest in Heineken.

The acquisition is expected to close in the second quarter of 2010.

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