E-Malt.com News article: 2340

Mexico's top brewer Femsa filed a lawsuit on March 12 in the United States to block the transfer of U.S. assets in the recently announced merger deal between Belgium's Interbrew and Brazil's AmBev. Femsa, which brews Sol, Tecate and Dos Equis brands, said the lawsuit was filed in the U.S. federal court for the Southern District of New York on grounds its U.S. subsidiary Wisdom that owns a 30 percent chunk of Labatt USA, currently controlled by Interbrew, was not consulted about the Interbrew-AmBev deal.

Femsa said one reason for filing the lawsuit is to try to stop the transfer of Interbrew's stake in Labatt USA to AmBev. "Femsa believes it is necessary to launch this legal action in order to preserve the rights of Wisdom as the owner of the minority stake in the association," Femsa said in a statement.

FEMSA announced on March 12 that its United States subsidiary, Wisdom Import Sales Co. ("Wisdom"), has commenced litigation in the United States District Court for the Southern District of New York, in Manhattan, against Interbrew, Labatt Brewing Company Limited ("Labatt"), and certain of their affiliates.

“The litigation seeks to enjoin certain aspects of the transaction announced on March 3, 2004 by Interbrew and the Brazilian brewer AmBev, including those parts of the transaction that involve a transfer of the majority interest in the limited liability company that governs the United States joint venture between FEMSA subsidiary FEMSA Cerveza and Interbrew subsidiary Labatt,” Femsa reported. “It is FEMSA's position that Wisdom's minority shareholder rights will be imminently violated because, among other things, the transfer of ownership is scheduled to occur in connection with the announced transaction, but without the required approval of Wisdom or its directors on the board of the joint venture company. FEMSA found it necessary to take this legal action in order to preserve Wisdom's rights as the holder of the minority interest in the joint venture company,” the company said.

On March 3, Interbrew agreed to buy a majority stake in Brazil's AmBev in a 9.2 billion euro ($11.5 billion) deal to create the world's biggest brewer by volume, surpassing U.S. rival Anheuser-Busch Cos. Inc. Interbrew said the suit was without merit and would not derail the merger plans. "We regret that Femsa felt it necessary to take this action, but are confident that it will not interfere with the planned combination of Interbrew and AmBev," Interbrew said in a statement posted on its Web site. "While we believe the suit is without merit, it does not change our previously stated desire to resolve our commercial differences with Femsa on a basis that makes sound business sense for all parties," the Belgian brewer added. In the Interbrew-AmBev deal, AmBev is to absorb Interbrew's North American operations, including Labatt USA.

AmBev's press office in Sao Paulo said it could not comment on the lawsuit because it was not directly mentioned. Femsa and Interbrew have long been at loggerheads over managing 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.

Analysts said the Femsa lawsuit was no surprise because it could force Interbrew to untie the knot with Femsa. Just as Femsa has a 30 percent stake in Labatt USA, Interbrew has a 30 percent stake in Femsa's beer division. "It was totally expected (the lawsuit) because if Femsa were to win they could recover the 30 percent that Interbrew has in Femsa Cerveza," said Manuel Jimenez, analyst at Vector brokers. Analysts have long suggested Femsa might repurchase Interbrew's stake in its beer division and annul their messy marriage. They estimate the price tag of the stake at anywhere from $750 million to $1.5 billion.

Femsa stock rose 1.64 percent in Mexico to 50.75 pesos, close to 12-month highs. On wall Street, its American Depositary Receipts increased 1.31 percent to $46.35, also near 12-month peaks. (Additional reporting by Gabriel Moreno).

FEMSA is the leading beverage company in Latin America. It controls an integrated beverage platform that comprises the largest Coca-Cola bottler in the region, Coca-Cola FEMSA; the second largest brewer in Mexico and important beer exporter to the United States, FEMSA Cerveza; and Oxxo, the largest and fastest growing convenience store chain in Mexico with over 2,750 stores.


16 March, 2004