MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings does not expect to take any rating action on Coca Cola Femsa, S.A.B. de C.V. (KOF) following the agreement with Corporacion de los Angeles, S.A. de C.V. and its shareholders (Grupo CIMSA) to merge their bottling operations. Fitch believes this merger is consistent with KOF's growth strategy in the beverage industry.
The transaction valued at MXN11 billion is subject to regulatory approvals and other customary conditions. Under the terms of the agreement, Grupo CIMSA will receive 75.4 million of new KOF's shares series L at a value of MXN118 per share and will assume MXN2.1 billion of net debt.
Fitch believes the merger with Grupo CIMSA will improve KOF's business position as the incorporation of contiguous territories and operations will allow the company to expand its coverage in Mexico and reach potential synergies of up to MX260 million from its production facilities and distribution network, among others. We estimate these synergies could be reached in the next 18 to 24 months once the transaction is closed.
In Fitch's view, KOF has enough flexibility to assume the debt portion of the transaction without having a significant effect on its credit profile. On a pro forma basis, considering KOF's last twelve months (LTM) EBITDA as of June 30, 2011 and incorporating Grupo Tampico and Grupo CIMSA transactions, net debt to EBITDA should approximate to 0.4 times (x).
Grupo CIMSA operates mainly in the states of Morelos and Mexico, and covers some territories in Guerrero and Michoacan. This company has three bottling plants and 18 distribution centers. Grupo CIMSA should sell in 2011 close to 159 million unit cases and generate net sales of approximately MXN4.8 billion and EBITDA of MXN1.1 billion. These figures represent around 6%, 4% and 5% of KOF's LTM as of June 30, 2011 consolidated volume, net sales and EBITDA, respectively.
Fitch currently rates KOF as follows
--Foreign Currency Issuer Default Rating (IDR) 'A';
--Local Currency Issuer Default Rating (IDR) 'A';
--National Scale Long-Term Rating 'AAA(mex)';
--National Scale Short-Term Rating F1+(mex)';
--Senior Notes for USD500 million 'A'
The Rating Outlook is stable.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 12, 2011).
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229
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