Coca-Cola FEMSA will merge with privately-held Mexican conglomerate Grupo Tampico

Coca-Cola FEMSA will merge with privately-held Mexican conglomerate Grupo Tampico

Coca-Cola FEMSA has lined up a merger with the bottling operations of privately-held Mexican conglomerate Grupo Tampico.

Under the agreement, valued at MXN6.55bn (US$555m), Mexico's largest soft-drink bottler will give Grupo Tampico 63.5m newly issued Coca-Cola FEMSA shares valued at MXN103.20 pesos per share, it said yesterday (28 June). It will also assume MXN2.75m in net debt.

In addition, Tampico's president, Herman Fleishman, and vice president, Robert Fleishman, will serve on a rotating basis, as director and alternate director, on the Coca-Cola FEMSA board.

Grupo Tampico's beverage division operates in the states of Tamaulipas, San Luis Potosí, and Veracruz, and parts of Hidalgo, Puebla and Queretaro. In 2011, the firm's beverage division is expected to sell around 154m unit cases of drinks, generating around MXN4.400bn of net sales.

Combined, Tampico's beverage division and Coca-Cola FEMSA's Mexican operations will have combined sales volume representing around 45% of the Coca-Cola system's volume in Mexico.

"This merger will reinforce our company's leadership position in Mexico and Latin America," said Coca-Cola FEMSA's CEO, Carlos Salazar Lomelin. "The team at Grupo Tampico´s beverage division will certainly enhance our joint operations' go-to-market capabilities, strengthen our diversified portfolio of geographies, and enable us to create value for our shareholders."

The merger agreement is subject to the completion of legal, financial, and operating due diligence and to customary regulatory and corporate approvals.

Coca-Cola FEMSA has always been open about its expansion ambitions. Early last year, Lomelin said the company was working on "rapid expansion", after reporting strong sales and profits for 2009.