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FEMSA (FMX) Concludes Valora Buyout To Expand in Europe

Fomento Económico Mexicano, S.A.B. de C.V. FMX, alias FEMSA, announced the completion of the acquisition of Valora Holding AG. The transaction worth CHF 260.00 net in cash per share was officially concluded on Oct 7. Valora will now operate as the retail wing of FEMSA’s Proximity Division in Europe markets.

Valora will continue to operate under its brand name, and retain its formats and concepts in sync with the current management’s expansion and operating plans. Valora will continue to have its headquarters and registered office in Muttenz, Switzerland.

The move is in sync with its long-planned target to expand in international markets. FEMSA will benefit from Valora’s strong market position across Europe and be able to expand its presence in the region. Also, FEMSA will accelerate Valora’s growth-oriented strategy in the convenience store and food service business, and boost the latter’s innovation and digital capabilities.

FEMSA’s fully-owned subsidiary Impulsora de Marcas e Intangibles, S.A. de C.V., acquired all publicly held registered shares of Valora through a public tender cash offer. FEMSA currently owns 97.77% of Valora shares.

FMX also revealed plans to initiate a squeeze-out procedure to cancel the remaining publicly held shares. It also intends to delist Valora from the SIX Swiss Exchange.

In the last reported quarter, FEMSA witnessed year-over-year revenue growth of 18.3% in the Proximity segment, driven by a 15.6% rise in same-store sales stemming from 3.4% growth in store traffic and an 11.1% increase in average tickets. Organic revenues for the Proximity segment improved 17.5% in second-quarter 2022.

What Else Should You Know?

FEMSA remains poised for growth through investments in digital and technology-driven initiatives. It continues to focus on offering customers more options to make contactless purchases by intensifying digital and technology-driven initiatives across operations. The company’s Coca-Cola FEMSA is leading the way with its omni-channel business, while FEMSA Comercio is progressing with the adoption of digital initiatives.

Within its OXXO store chains, the company is on track with investing in digital offerings, loyalty programs and fintech platforms to evolve stronger after the pandemic and over the long term. Its OXXO digital wallet, OXXO Premia and loyalty program have been performing well.

In the second quarter, the company made progress on its digital efforts, with customer acquisition surpassing 15 million users. These users are part of the company’s digital ecosystem, either through Spin by OXXO, OXXO Premia or both.

FEMSA has been on track with its strategy of creating a national distribution platform in the United States through the expansion of its footprint in the specialized distribution industry. The company’s venture in the specialized distribution industry relates to its plan of investing in adjacent businesses, which can leverage capabilities across different markets, providing an opportunity for attractive growth and risk-adjusted returns.

With the presence of its OXXO business and other retail operations, the company has become an expert in the organization and management of supply chains and distribution systems. Notably, FEMSA serves large numbers of businesses and retail customers through millions of interactions in different industries.

 

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Shares of this Zacks Rank #2 (Buy) company have gained 6.6% in the past three months against the industry’s decline of 6.6%.

Stocks to Consider

We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely General Mills GIS, PepsiCo PEP and Constellation Brands STZ.

General Mills, which manufactures and markets branded consumer foods worldwide, currently carries a Zacks Rank of 2. The company has an expected EPS growth rate of 7.5% for three to five years. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for General Mills’ current financial year’s sales and EPS suggests growth of 2% and 1.5%, respectively, from the year-ago reported figures. GIS has a trailing four-quarter earnings surprise of 6.5%, on average.

PepsiCo is one of the leading global food and beverage companies. It currently has a Zacks Rank #2. The company has an expected EPS growth rate of 7.7% for three to five years.

The Zacks Consensus Estimate for PepsiCo’s current financial-year sales and earnings suggests growth of 5.6% and 6.4%, respectively, from the year-ago period’s reported figures. PEP has a trailing four-quarter earnings surprise of 3.8%, on average.

Constellation Brands is one of the largest beer companies and a leading, high-end wine company in the United States. It currently has a Zacks Rank #2. The company has an expected EPS growth rate of 10.8% for three to five years.

The Zacks Consensus Estimate for STZ’s current financial-year sales suggests growth of 5.7% from the year-ago period’s reported figure, while the same for earnings indicates a 0.6% decline. Constellation Brands has a trailing four-quarter earnings surprise of 10.5%, on average.


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General Mills, Inc. (GIS) : Free Stock Analysis Report
 
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