E-Malt.com News article: 2295

Mexican brewer and bottler Femsa, hoping to end wrangling over a U.S. distribution venture, said on March 4 it will seek to strike a deal with Belgium's Interbrew and Brazil's AmBev, which plan to form the world's biggest brewer, "Femsa is going to have to sit down with Interbrew and AmBev to see what we want," a Femsa source told Reuters, requesting to remain anonymous.

Interbrew agreed on March 3 to buy a majority stake in AmBev in a 9.2 billion euro ($11.5 billion) deal to create the world's biggest brewer by volume. The new brewer, to be called InterbrewAmBev, will surpass U.S. rival Anheuser-Busch.

Interbrew has a 30 percent stake in Femsa's beer unit, which brews Sol, Tecate and Dos Equis brands. Femsa has a similar stake in Interbrew's Labatt USA, which promotes and distributes both their beers in the United States.

Femsa-Interbrew relations hit rocky ground when Interbrew acquired Becks beers in August 2001. The Belgian brewer wanted to merge its Labatt USA and Becks distribution networks in the United States to cut costs. Femsa blocked the merger with an injunction, saying it was not consulted.

With the creation of InterbrewAmbev, Ambev will take control of the North American assets of Interbrew, including the 30 percent stake in Femsa's beer division, Canada's Labatt and control of Labatt USA.

Heads of the new InterbrewAmBev reached out on Wednesday to Femsa to end their dispute, saying the creation of the new Euro-Brazilian brewer was an opportunity to realign their relationship.

They did not speak of selling their 30 percent to Femsa, which for some analysts would be a simple solution to the problem. Nor did they mention buying out the Mexican brewer, another exit.

But one party buying out the other is the most likely outcome, analysts say.

"Should Femsa repurchase its 30 percent stake ... we would expect the company to establish a new relationship capable of strengthening U.S. distribution and adding U.S.-Mexico cross border synergies shortly thereafter," Merrill Lynch said in a research report.

Another option is that Femsa sells its beer division to concentrate on its soft drinks unit, Coca-Cola Femsa, the No. 2 Coke bottler in the world.

Femsa's shares rose 2.09 percent on March 4 to 54.15 pesos, a 12-months high. Its shares on Wall Street rose 4.09 % to $49.41, also close to a 12-month peak


05 March, 2004