Femsa and Interbrew will sever business ties

Modern Brewery Age, May 31, 2004

Fomento Economico Mexicano, S.A. de C.V. (FEMSA), announced today that it has signed agreements to unwind its existing business relationship with Interbrew.

Femsa agreed to pay Interbrew $1.245 billion to break up their 10-year-old partnership In return, Femsa dropped its objection to Interbrew's planned purchase of Brazil's AmBev, which Femsa had threatened to block with a court injunction.

Interbrew agreed in March to take control of AmBev in a 9.2 billion-euro ($11 billion) deal that would create the world's biggest brewer by volume.

Under the terms of the deal, the Mexicans regain control of their U.S. exports and Interbrew also sells back a 30 percent stake it had in Femsa's beer unit. Femsa also hands back its 30% share of Labatt USA.

"This transaction will also enable us to redefine the approach to our export strategy and increase the growth of our brands in the United States," Femsa chairman Jose Antonio Fernandez said in a statement.

Femsa said that taking back 100 percent control of its brewery and U.S. import arm will allow it to revamp its export operations.

Femsa directors said in a press conference last week they were ready to take on the U.S. market alone with a new distribution network if necessary, focusing more effort on the eastern United States.

There has been speculation that Femsa might link up with another U.S. importer for its U.S. operations. Speculation has centered on Heineken U.S.A. and Adolph Coors Co. as possible partners. Analysts had hoped that Femsa would announce such a partnership immediately. "We don't intend to do a fast-track search for a strategic partner," Javier Astaburuaga, chief executive of Femsa's beer division, told a conference call. "We are ready to do this on our own."