In an effort to further diversify its product portfolio and expand in the small-box retail segment, Fomento Economico Mexicano SAB de CV (FMX) or FEMSA, through its unit FEMSA Comercio S.A. de C.V. (“FEMSA Comercio”), has agreed to fully acquire Mexican drugstore operator, Farmacias Farmacón.
Farmacias Farmacón is one of the leading drugstore operators in the western states of Sinaloa, Sonora, Baja California and Baja California Sur in Mexico. With its base in the city of Culiacán in Sinaloa, the drugstore chain has more than 200 stores in operation. While FEMSA did not provide the financial details of the deal, it expects the acquisition to be completed in the first quarter of fiscal 2015, on receiving customary regulatory approvals.
The owner of Coca-Cola FEMSA (KOF), the world’s largest franchise bottler of The Coca-Cola Company (KO) products, has been aggressively seeking to capitalize on the growing drugstore business in Mexico. Last year, the company forayed into the drugstore retail chain business by fully acquiring Mexico-based Farmacias FM Moderna and buying 75% stake in Farmacias YZA. We believe that FEMSA’s venture into the drugstore business strategically fits its chain store business, and will be accretive to both its top and bottom lines in the long term.
Additionally, this Zacks Rank #3 (Hold) company has been diversifying its retail chain format operations and acquiring businesses across Latin America. In this context, FEMSA bought 80% stake in the fast-food restaurant chain Dona Tota in Sep 2013.
FEMSA, which competes with Coca-Cola Enterprises Inc. (CCE), has a healthy balance sheet with cash and cash equivalents of Ps. 41,751 million at the end of third-quarter 2014. We believe that FEMSA is effectively utilizing its available funds to grow its core bottling and convenience store operations as well as to expand its organic and inorganic businesses. In the first three quarters of 2014, FEMSA incurred capital expenditure of Ps. 11,969 million, mainly invested in Coca-Cola FEMSA and FEMSA Comercio.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment