FOMENTO
ECONOMICO MEXICANO, S.A.B. DE C.V.
Ave.
General Anaya 601 Pte
Colonia
Bella Vista, 64410
Monterrey,
N.L, México
Tel.
(52-81) 8328-6000
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TRANSLATION
OF
INFORMATION
STATEMENT WITH RESPECT TO CORPORATE RESTRUCTURING
March
30, 2010
Brief
Summary of the Transaction
On
January 11, 2010, Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”) signed a
strategic agreement with Heineken Holding N.V. (“Heineken Holding”) and Heineken
N.V. (“Heineken”) to exchange 100% of its beer operations in Mexico and Brazil
owned through its subsidiary EMPREX Cerveza, S.A. de C.V. for a 20% economic
interest in the Heineken Group, by executing the required documentation, which
is subject to the fulfillment of several conditions (the
“Transaction”).
The
Transaction is part of FEMSA’s strategy to capitalize the significant value
achieved by FEMSA, through its beer operations, over the last decade,
strengthening its competitive position, brand portfolio and operation
capability; extend FEMSA’s potential value creation in the long term, allowing
its shareholders access to solid prospects in the international brewing
industry, as well as better market diversification; achieve corporate and
financial flexibility in order to seek growth opportunities in its other lines
of business (other than beer); and substantially contribute, in its capacity as
a significant shareholder, to Heineken’s global success, and particularly in
Mexico.
The
shares representing FEMSA’s capital stock are registered in the National
Securities Registry in Mexico (Registro Nacional de Valores)
and listed in the Mexican Stock Exchange (Bolsa Mexicana de Valores, S.A.B. de
C.V.), under the trading symbol “FEMSA UBD” and “FEMSA UB”, and through
American Depositary Receipts, in the New York Stock Exchange under the trading
symbol “FMX”.
This
Information Statement does not constitute an offer to sell any securities in
Mexico or any other jurisdiction; rather, it has been prepared and made
available to the public in order for FEMSA’s shareholders to consider and, if
they agree, approve the Transaction, pursuant to applicable law and FEMSA’s
bylaws.
The
Transaction does not require the issuance of new securities representing FEMSA’s
capital stock, nor any modification whatsoever regarding the current securities
or an amendment to FEMSA’s bylaws.
Copies of
this Information Statement are available for shareholders at FEMSA’s Investor
Relations Department, with its offices located at General Anaya No. 601
Pte., Colonia Bella Vista, Monterrey, Nuevo León, Mexico 64410, Attention to
Juan Fonseca, Phone: (52-81) 8328-6245, or Maximilian Zimmerman, Phone (52-81)
8328-6211. The electronic version of this Information Statement is available in
the following websites: and www.femsa.com and
www.bmv.com.mx.
Registration
in the National Securities Registry does not entail a comment on the securities’
reliability, the issuer’s solvency or the accuracy or veracity of the
information contained in this statement, nor does it validate any acts that, as
the case may be, were performed in violation of the law.
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Page
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1.
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DEFINITIONS
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2
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2.
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EXECUTIVE
SUMMARY
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5
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3.
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DETAILED
INFORMATION WITH RESPECT TO THE TRANSACTION
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6
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3.1
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Detailed
Description of the Transaction
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6
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3.1.1
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Share
Exchange Agreement
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6
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3.1.2
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Corporate
Governance Agreement
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9
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3.2
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Purpose
of the Transaction
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10
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3.3
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Expenses
related to the Transaction
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10
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3.4
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Transaction
Approval
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10
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3.5
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Accounting
Treatment of the Transaction
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11
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3.6
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Tax
Effects of the Transaction
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11
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4.
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PARTIES
TO THE TRANSACTION
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12
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4.1
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FEMSA
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12
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4.1.1
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Issuer’s
Name
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12
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4.1.2
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Business
Description
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12
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4.1.3
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Evolution
and Recent Developments
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12
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4.1.4
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Ownership
Structure
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12
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4.1.5
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Relevant
changes in the Financial Statements since the last Annual
Report
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12
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4.2
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Heineken
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15
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4.2.1
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Company’s
Name
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15
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4.2.2
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Business
Description
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15
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4.2.3
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Evolution
and Recent Developments
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15
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4.2.4
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Ownership
Structure
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15
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4.2.5
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Relevant
changes in the Financial Statements since the last annual
report
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15
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4.3
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Heineken
Holding
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15
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4.3.1
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Company’s
Name
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15
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4.3.2
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Business
Description
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15
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4.3.3
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Evolution
and Recent Developments
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15
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4.3.4
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Ownership
Structure
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15
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4.3.5
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Relevant
changes in the Financial Statements since the last annual
report
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15
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5.
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RISK
FACTORS
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16
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5.1
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Risk
Factors Relating to FEMSA
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16
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5.2
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Risk
Factors Relating to the Transaction
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16
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6.
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SELECTED
FINANCIAL INFORMATION
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18
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(continued)
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Page
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7.
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MANAGEMENT
DISCUSSION AND ANALISIS WITH RESPECT TO THE RESULTS OF OPERATION AND THE
FINANCIAL SITUATION OF THE ISSUER
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20
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7.1
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Operation
Results
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20
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7.2
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Financial
Situation, Liquidity and Capital Resources
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21
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8.
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OFFICERS
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22
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9.
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EXHIBITS
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23
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Forward-Looking
Statements and Related Risks
Some of
the statements in this Information Statement are forward-looking. In
addition, FEMSA may make forward-looking statements in future filings with the
regulatory authorities and in written materials, press releases and oral
statements issued by or on behalf of it. Forward-looking statements
include statements regarding FEMSA’s intent, belief or current expectations or
those of its officers (including statements preceded by, followed by or that
include forward-looking terminology such as “may”, “will”, “should”, “believes”,
“expects”, “anticipates”, “estimates”, “continues”, or similar expressions or
comparable terminology) with respect to various matters. These
matters include:
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statements
of our or our affiliates’ and partners’ plans, objectives or goals,
including those relating to anticipated trends, competition, regulation
and rates;
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·
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statements
about our or our affiliates’ and partners’ future economic performance or
that of Mexico or other countries in which we operate or have investments;
and
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·
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statements
of assumptions underlying these
statements.
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It is
important to note that FEMSA’s actual results could differ materially from those
anticipated in these forward-looking statements depending on various important
factors. These important factors include economic and political
conditions and government policies in Mexico and elsewhere, inflation rates,
exchange rates and exchange controls in Mexico, rate adjustments, regulatory
developments, technological improvements, customer demand and
competition. This list of factors is not exclusive and other risks
and uncertainties may cause actual results to differ materially from those in
forward-looking statements.
All
information and forward-looking statements contained in this Information
Statement are based on information available to FEMSA on the date hereof. FEMSA
does not undertake to update any information or forward-looking statement that
may be made by it or on FEMSA’s behalf, in this Information Statement or
otherwise, except in the normal course of its public disclosures.
1. DEFINITIONS
Unless
the context indicates otherwise, all references made in this Information
Statement to the following terms shall have the meaning specified in this
glossary and shall be applicable for the terms, whether defined in the singular
or plural form.
“Allotted
Share Delivery Instrument”
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means
the Allotted Share Delivery Instrument, between Heineken and FEMSA, to be
executed on the date of the Closing and pursuant to which Heineken will
deliver an additional 29,172,504 Heineken Shares to FEMSA over a period of
not more than five years from the Closing.
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“Allotted
Shares”
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means
the Heineken Shares that are the subject of the Allotted Share Delivery
Instrument.
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“Annual
Report”
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means
FEMSA’s Annual Report for the year ending December 31, 2008, filed with
the CNBV and BMV, in accordance with the General Provisions, which may be
accessed through any of the following websites: www.femsa.com and www.bmv.com.mx.
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“Brazil”
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means
the República Federativa de Brasil
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“BMV”
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means
the Mexican Stock Exchange (Bolsa Mexicana de Valores,
S.A.B. de C.V.).
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“CINIF”
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means
the Mexican Counsel for the Investigation and Development of Financial
Information Norms (Consejo Mexicano para la
Investigación y Desarrollo de Normas de Información Financiera,
A.C.).
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“Closing”
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means
the closing of the Transaction pursuant to the Share Exchange Agreement,
which shall occur no later than 3 days following the satisfaction of all
the conditions to closing contained therein.
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“CNBV”
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means
the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y
de Valores).
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“Colombia”
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means
the República de Colombia
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“Corporate
Governance Agreement”
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means
the Corporate Governance Agreement, which shall be executed on the date of
the Closing, between Heineken, Heineken Holding, L’Arche Green N.V. and
some of the FEMSA Parties and which regulates the relationship between the
Heineken Group and FEMSA
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“Dollars”
or “US$”
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means
the legal currency of the USA.
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“€”
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means
Euros.
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“EBITDA”
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means
earnings before other expenses, interest, tax, depreciation and
amortization.
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“EMPREX
Cerveza”
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means
EMPREX Cerveza, S.A. de C.V.
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“FEMSA”
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means
Fomento Económico Mexicano, S.A.B de C.V., and when so required by
context, FEMSA jointly with its consolidated
subsidiaries.
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“FEMSA
Board”
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means
the Board of Directors of FEMSA.
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“FEMSA
Cerveza”
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means
EMPREX Cerveza and its subsidiaries (including FEMSA Cerveza, S.A. de
C.V.) including the business of its subsidiaries in Mexico (including USA
and other export business), as well as the remaining 82.95% of EMPREX
Cerveza’s business in Brazil of which currently Heineken is not the
owner.
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“FEMSA
Meeting”
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means
the general ordinary shareholders meeting of FEMSA to be held at Ave.
Alfonso Reyes # 2202 Norte, Monterrey, Nuevo León, on Monday April 26,
2010 at 12:00 p.m
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“FEMSA
Parties”
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means,
collectively, FEMSA, Compañía Internacional de Bebidas, S.A. de C.V. and
Grupo Industrial Emprex, S.A. de C.V.
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“FEMSA
Shareholders Approval”
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means
the approval of the Transaction by FEMSA shareholders which own the
majority of the FEMSA shares at the FEMSA Meeting.
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“General
Provisions”
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means
the General Provisions Applicable to Securities Issuers and Other
Participants of the Stock Exchange (Disposiciones de Carácter General aplicables
a las Emisoras de Valores y a otros Participantes del Mercado de
Valores), published in the Official Federal Gazette (Diario Oficial de la
Federación) on March 19, 2003, as amended.
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“Heineken”
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has
the meaning assigned to it in the cover of this Information
Statement.
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“Heineken
Executive Board”
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means
the Executive Board (raad van bestuur) of
Heineken.
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“Heineken
Group”
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means
Heineken Holding, Heineken and its subsidiaries.
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“Heineken
Holding”
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means
Heineken Holding N.V.
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“Heineken
Holding Board”
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means
the Board of Directors (Raad van Beheer) of
Heineken Holding.
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“Heineken
Holding Meeting”
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means
the general meeting of the Heineken Holding shareholders to be held at
Beurs van Berlage, Damrak 243, Amsterdam, the Netherlands on Thursday
April 22, 2010 at 4:00 p.m. (CET).
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“Heineken
Holding Shares”
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means
ordinary shares, par value €1.60, in the capital stock of Heineken
Holding.
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“Heineken
Holding Shareholders Approval”
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means
the approval of the holders of a simple majority of the Heineken Holding
Shares and the holders of the Heineken Holding priority shares (prioriteitsaandelen) at
the Heineken Holding Meeting of resolutions authorizing (i) Heineken
Holding Board to issue the Heineken Holding exchange shares to FEMSA and
(ii) the right of FEMSA to nominate representatives to the Heineken
Holding Board and other rights of FEMSA under the Corporate Governance
Agreement.
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“Heineken
Meeting”
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means
the general meeting of Heineken shareholders to be held at Beurs van
Berlage, Damrak 243, Amsterdam, the Netherlands on Thursday on April 22,
2010 at 2:00 p.m. (CET).
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“Heineken
Shareholders Approval”
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means
the approval by the holders of a simple majority of the Heineken Shares at
the Heineken Meeting, of resolutions authorizing (i) the Heineken
Executive Board to issue the Heineken exchange shares to FEMSA and (ii)
the right of FEMSA to nominate representatives to the Heineken Supervisory
Board and other rights of FEMSA under the Corporate Governance
Agreement.
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“Heineken
Shares”
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means
ordinary shares, par value €1.60, in the capital stock of
Heineken.
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“Heineken
Supervisory Board”
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means
the Supervisory Board (raad van
commissarissen) of Heineken.
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“Heineken’s
Termination Events”
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has
the meaning established in Section 5.2 of this Information
Statement.
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“Income
from Operations”
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means
earnings before other expenses, interest and tax.
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“Information
Statement”
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means
this information statement with respect to corporate restructuring,
prepared by FEMSA pursuant to the provisions in Article 35 and Annex P of
the General Provisions.
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“Kaiser”
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means
Cervejarias Kaiser Brasil S.A., an entity incorporated in accordance with
the applicable laws of Brazil.
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“Mexico”
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means
the United Mexican States.
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“NIF”
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means
Financial Information Norms issued by CINIF.
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“NYSE”
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means
The New York Stock Exchange.
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“Pesos” or
“Ps.”
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means
the legal currency in Mexico.
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“Quarterly
Report”
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means
FEMSA’s quarterly report for the quarter ending December 31, 2009, filed
with the CNBV and BMV, in accordance with the General Provisions, which
may be accessed through any of the following websites: www.femsa.com and www.bmv.com.mx.
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“Share
Exchange Agreement”
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means
the Share Exchange Agreement dated January 11, 2010, executed between
Heineken, Heineken Holding and the FEMSA Parties to exchange 100% of the
beer operations in Mexico and Brazil of FEMSA’s subsidiary EMPREX Cerveza
for a 20% economic interest in Heineken Group.
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“Termination
Fee”
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means
the amount of US$200 million Dollars.
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“Transaction”
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has
the meaning assigned to it in the cover of this Information
Statement.
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“USA”
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means
the United States of America.
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“Voting
Trust”
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means
the trust created pursuant to the Irrevocable Trust Agreement Number 436
dated August 8, 2005, which holds as assets shares in
FEMSA.
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2. EXECUTIVE
SUMMARY
This
summary includes a brief description of the most relevant aspects of the
Transaction and it is not intended to contain all the information about it that
may be relevant, therefore, it shall be complemented with the most detailed
information and the financial information included in other sections of this
Information Statement, as well as the Annual Report and the Quarterly Report,
which are available in the following websites: www.femsa.com and
www.bmv.com.mx
FEMSA is
the leading beverage company in Latin America. FEMSA controls a platform
consisting of (i) Coca-Cola FEMSA, the largest Coca-Cola bottler in Latin
America; (ii) FEMSA Cerveza, one of the leading brewers in Mexico, with presence
in Brazil and an important exporter of beer to the USA and other countries in
the world; and (iii) OXXO, the largest and fastest growing convenience store
chain in Mexico with more than 7,000 stores and which also has a presence in
Colombia. For a complete description of FEMSA’s business and operations, see the
Annual Report and the Quarterly Report.
Heineken
is one of the world’s leading brewers with more than 170 international brands.
Heineken has a presence in more than 65 countries through its network of
distributors and 115 breweries.
On
January 11, 2010, FEMSA and certain of its subsidiaries executed an agreement
with Heineken Holding and Heineken, of Dutch origin, to exchange 100% of
its beer operations in Mexico and Brazil owned through its subsidiary
EMPREX Cerveza for a 20% economic interest in the Heineken Group, by executing
the required agreements and documentation, which specify conditions that are
customary in transactions of this nature.
Under the
proposed terms of the Transaction, at Closing, Heineken will deliver to the
FEMSA Parties 86,028,019 of new shares with a commitment to deliver an
additional 29,172,504 Heineken shares to FEMSA over a period of not more than
five years. If Heineken is unable to fulfill its obligations to deliver the
Allotted Shares, these obligations may be settled in cash with a significant
penalty. Simultaneously with the Closing, Heineken Holding will exchange
43,018,320 of the new Heineken shares with the FEMSA Parties for an equal number
of newly issued shares in Heineken Holding. Following delivery of all such
Heineken and Heineken Holding shares, FEMSA will hold a 20% economic interest in
the Heineken Group. In exchange, FEMSA will deliver 100% of the
shares of EMPREX Cerveza.
The
Transaction is part of FEMSA’s strategy to capitalize the significant
value achieved by FEMSA, through its beer operations, over the last decade,
strengthening its competitive position, brand portfolio and operation
capability; extend FEMSA’s potential value creation in the long term, allowing
its shareholders access to solid prospects in the international brewing
industry, as well as better market diversification; achieve corporate and
financial flexibility in order to seek growth opportunities in its other lines
of business (other than beer); and substantially contribute, in its capacity as
a significant shareholder, to Heineken’s global success, and particularly in
Mexico.
3. DETAILED
INFORMATION WITH RESPECT TO THE TRANSACTION
3.1
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Detailed
Description of the Transaction
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On
January 11, 2010, FEMSA and certain of its subsidiaries, entered into a Share
Exchange Agreement with Heineken Holding and Heineken, pursuant to which FEMSA
agreed to exchange 100% of the shares of EMPREX Cerveza’s capital stock for 20%
of the economic interest in the Heineken Group.
3.1.1
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Share
Exchange Agreement
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The Share
Exchange Agreement requires Heineken, in consideration for 100% of the shares of
EMPREX Cerveza, to deliver at Closing 86,028,019 new Heineken Shares to FEMSA
with a commitment to deliver 29,172,504 additional Heineken Shares over a period
of not more than five years from the date of Closing. If Heineken is unable to
fulfill its obligations to deliver the Allotted Shares, these obligations may be
settled in cash with a significant penalty. The Allotted Shares will be
delivered to the FEMSA Parties pursuant to the Allotted Shares Delivery
Instrument, which is described below.
Simultaneously
with Closing, Heineken Holding will swap 43,018,320 Heineken Shares with the
FEMSA Parties for an equal number of newly issued Heineken Holding
Shares. Upon Closing, FEMSA will own 7.5% of Heineken Shares, which
will increase to 12.5% upon full delivery of the Allotted Shares, and an
additional 14.9% in Heineken Holding, which will represent an aggregate 20%
economic interest in the Heineken Group.
In
exchange for such economic interest in the Heineken Group, FEMSA will deliver
100% of the shares representing the capital stock of EMPREX Cerveza. EMPREX
Cerveza will become a wholly owned subsidiary of Heineken.
The
principal provisions of the Share Exchange Agreements are as
follows:
·
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Delivery
to Heineken, by FEMSA, of 100% of the outstanding share capital of EMPREX
Cerveza, which together with its subsidiaries, constitutes the entire beer
business and operations of FEMSA in Mexico and Brazil (including the USA
and other export business);
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·
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Delivery
to the FEMSA Parties by Heineken of 86,028,019 new Heineken
Shares;
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·
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Simultaneously
with the Closing, a swap between Heineken Holding and the FEMSA Parties of
43,018,320 Heineken shares for an equal number of newly issued shares in
Heineken Holding;
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·
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The
commitment by Heineken to assume indebtedness of EMPREX Cerveza and
subsidiaries amounting to approximately US$2.1 billion
Dollars;
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·
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The
provision by FEMSA to the Heineken Group of indemnities customary in
transactions of this nature concerning FEMSA and FEMSA Cerveza and its
subsidiaries and their businesses;
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·
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FEMSA’s
covenants to operate the EMPREX Cerveza business in the ordinary course
consistent with past practice until Closing, subject to customary
exceptions, with the economic risks and benefits of the EMPREX Cerveza
business transferring to Heineken as of January 1,
2010;
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·
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The
provision by Heineken and Heineken Holding to FEMSA of indemnities
customary in transactions of this nature concerning the Heineken Group;
and
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·
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FEMSA’s
covenants, subject to certain limitations detailed below, to not engage in
the production, manufacture, packaging, distribution, marketing or sale of
beer and similar beverages in Latin America, USA, Canada and the
Caribbean.
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The
effectiveness of the Share Exchange Agreement is subject to certain conditions,
which are comprised principally of (i) the approval by the antitrust regulatory
authority in Mexico, USA and other countries, (ii) the approval by the Foreign
Investment authorities of the Ministry of Economy in Mexico, (iii) the FEMSA
Shareholders Approval, (iv) the Heineken Shareholders Approval, (v) the Heineken
Holding Shareholders Approval, (vi) the entrance into certain agreements related
to the Transaction, and (vii) the lack of an applicable provision or decree from
any authority prohibiting the Closing.
Based on
the Heineken closing share price of €32.92, and the Heineken Holding closing
share price of €29.38 as of January 8, 2010 (the last trading day prior to
entering into the Transaction), the delivery of 115,200,523 Heineken Shares
(including the Allotted Shares) was valued the Transaction at US$7,355 million
Dollars, including net debt and pension obligations to be assumed by Heineken of
Ps. 27,424 million (approximately US$2.1 billion Dollars).
The
following graphic illustrates the ownership structure resulting from the
Transaction, once the Allotted Shares have been delivered:
The Share
Exchange Agreement may be terminated at any time prior to Closing
by:
(A)
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the
mutual consent of Heineken and FEMSA to terminate the Share Exchange
Agreement;
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(B)
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either
Heineken or FEMSA, if any governmental entity or authority in Mexico, The
Netherlands or the USA issues or files an order or takes any other action
permanently restraining or otherwise prohibiting the Closing (such order
or ruling shall have become final and
non-appealable);
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(C)
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either
Heineken or FEMSA, if the Closing has not occurred on or prior to October
8, 2010;
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(D)
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either
FEMSA or Heineken, if certain conditions to Closing, such as receipt of
governmental approvals, are impossible to
fulfill;
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(E)
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FEMSA,
if the Heineken Shareholders Approval or Heineken Holding Shareholders
Approval are not obtained at the Heineken Meeting and Heineken Holding
Meeting;
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(F)
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Heineken,
if the FEMSA Shareholders Approval is not obtained at the FEMSA
Meeting;
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(G)
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Heineken,
if the FEMSA Board withdraws or modifies its recommendation to the FEMSA
shareholders to approve the Transaction or if the FEMSA Board announces an
intention to modify or withdraw its recommendation or has endorsed or
announces an intention to endorse an alternative acquisition proposal;
or
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(H)
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either
Heineken or FEMSA, in the event that any authorization of an antitrust
regulatory authority contains conditions or requires modifications that
materially change the economic value contemplated in the Transaction and
the parties to the Share Exchange Agreement are unable to agree on
amendments within sixty (60) days that satisfy such
conditions.
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Heineken
and FEMSA have agreed to a termination fee for the Share Exchange Agreement of
US$200 million Dollars.
The
Termination Fee will be payable in the following events:
a)
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by
Heineken to FEMSA, if FEMSA terminates the Share Exchange Agreement
because Heineken and/or Heineken Holding fail to obtain the Heineken
Shareholders Approval and the Heineken Holding Shareholders Approval of
the Transaction at their respective shareholders
meetings.
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b)
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by
FEMSA to Heineken, if Heineken terminates the Share Exchange Agreement
because the Transaction is not approved by the FEMSA shareholders, or the
FEMSA Board withdraws or modifies its recommendation to the FEMSA
shareholders to approve the Transaction, or announces an intention to do
so or if the FEMSA Board endorses or announces an intention to endorse an
alternative acquisition proposal.
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3.1.1.2
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Non-Competition
Arrangements
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As part
of FEMSA’s undertaken obligations, the Share Exchange Agreement contains certain
non-compete obligations described below:
(i) Parties Subject to the Obligation
– FEMSA and its subsidiaries (which, excluding the beer business
subsidiaries and those that are subject to the Transaction, are mainly active in
the production, distribution and marketing of soft drinks in Latin America and
the operation of retail stores);
(ii) Scope of the Obligation –
Limited to the production, manufacture, packaging, distribution, marketing or
sale of beer, non-alcoholic beer and beverages derived from beer and the beer
brewing and fermentation process, malted beverages, wort-based beverages and
ciders and cider-based beverages, provided the latter contain
alcohol;
(iii) Term of the Obligation – For
as long as FEMSA has the right to appoint a member of the Heineken Holding Board
or the Heineken Supervisory Board, and for an additional period of two (2) years
from the moment FEMSA ceases to have such right;
(iv) Territory – South
America, Central America, Mexico, USA, Canada and the Caribbean (including
Cuba);
(v) Exceptions – The non-compete
arrangements previously described do not apply to small operations in the USA
related to convenience store operations by FEMSA in such country, nor to the
sale, marketing and distribution of the products specified in paragraph (ii)
above, in stores owned or operated by FEMSA or any of its
subsidiaries.
3.1.1.3
|
Allotted
Shares Delivery Instrument
|
The
Allotted Shares Delivery Instrument sets forth the terms pursuant to which
Heineken will deliver the Allotted Shares to FEMSA. Heineken’s
commitment is to deliver these shares in up to ten installments over a period of
not more than five years. While Heineken’s intention is to satisfy
its obligation pursuant to the ASDI through the delivery of existing Heineken
shares acquired in the market, Heineken may instead elect to deliver newly
issued shares to FEMSA. If Heineken is unable, for any reason, to
fulfill its obligations to deliver the Allotted Shares, these obligations may be
settled in cash with a significant penalty. Heineken has the option
to accelerate the delivery of the Allotted Shares at its
discretion.
For as
long as it has not made delivery of the Allotted Shares, Heineken will pay
amounts on each Allotted Share not delivered pursuant to the Allotted Share
Delivery Instrument, such that FEMSA will be compensated, on an after tax basis,
for dividends FEMSA would have received had all such Allotted Shares been
delivered to FEMSA at Closing.
The
Allotted Shares represent 5.1% of the share capital of Heineken (taking into
account the 86,028,019 newly issued Heineken Shares issued in connection with
the Transaction). Based upon the Heineken Share price of €32.925, as
of January 8, 2010, the value of the Allotted Shares was €1.0
billion.
3.1.2
|
Corporate
Governance Agreement
|
At
Closing, FEMSA, Heineken, Heineken Holding and L’Arche Green N.V., as majority
shareholder of Heineken Holding, will enter into the Corporate Governance
Agreement which will establish the terms of the relationship between Heineken
and FEMSA after Closing.
The
Corporate Governance Agreement covers, among other things, the following
topics:
·
|
FEMSA’s
representation on the Heineken Holding Board and the Heineken Supervisory
Board and the creation of an Americas Committee, also with FEMSA’s
representation;
|
·
|
FEMSA’s
representation on the Selection and Appointment Committee and the Audit
Committee of the Heineken Supervisory
Board;
|
·
|
FEMSA’s
commitment to not increase its holding in Heineken Holding above 20% and
to not increase its holding in the Heineken Group above a maximum 20%
economic interest (subject to certain exceptions);
and
|
·
|
FEMSA’s
agreement to not transfer any shares in Heineken or Heineken Holding for a
five-year period, subject to certain exceptions, including among others;
(i) beginning in the third anniversary, the right to sell up to 1% of all
outstanding shares of each of Heineken and Heineken Holding in any
calendar quarter; (ii) beginning in the third anniversary, the right to
dividend or distribute to its shareholders each of Heineken and Heineken
Holding shares.
|
Under the
Corporate Governance Agreement, FEMSA will be entitled to nominate two (2)
representatives to the Heineken Supervisory Board, one of whom will be appointed
as Vice Chairman of Heineken and will also serve as a representative of FEMSA on
the Heineken Holding Board. FEMSA’s nominees for appointment to the Heineken
Supervisory Board are José Antonio Fernández Carbajal, FEMSA’s Chief Executive
Officer, and Javier Astaburuaga Sanjines, FEMSA’s Chief Financial
Officer. Once the approval of the Heineken Holding Shareholders is
obtained, José Antonio Fernández Carbajal will also be nominated to the Heineken
Holding Board.
In
addition, the Heineken Supervisory Board will create an Americas Committee to
oversee the strategic direction of the business in the American continent and
assess new business opportunities in that region. The Americas
Committee will consist of two existing members of the Heineken Supervisory Board
and one FEMSA representative, who will act as the Chairman. The Chairman of the
Americas Committee will be José Antonio Fernández Carbajal.
The
Corporate Governance Agreement has no fixed term, but certain provisions cease
to apply if FEMSA ceases to have the right to nominate a representative to the
Heineken Holding Board and the Heineken Supervisory Board. For example, in
certain circumstances, FEMSA would be entitled to only one representative on the
Heineken Supervisory Board, including in the event that FEMSA’s economic
interest in the Heineken Group were to fall below 14%, the current FEMSA control
structure were to change or FEMSA were to be subject to a change of
control. In the event that FEMSA’s economic interest in Heineken
falls below 7% or a beer producer acquires control of FEMSA, all of FEMSA’s
corporate governance rights would end pursuant to the Corporate Governance
Agreement.
3.2
|
Purpose
of the Transaction
|
For
FEMSA, the Transaction has several purposes, among which are the transformation
of its beer operations into an economic interest equal to 20% in Heineken and,
as a result:
·
|
capitalize
the significant value achieved by FEMSA, through its beer operations, over
the last decade, strengthening its competitive position, brand portfolio
and operational capability;
|
·
|
extend
FEMSA’s potential creation of value in the long term, allowing its
shareholders access to solid prospects in the international brewing
industry, as well as better market
diversification;
|
·
|
achieve
corporate and financial flexibility in order to search for growth
opportunities in its other lines of business (other than beer);
and
|
·
|
substantially
contribute, as a significant shareholder, to Heineken’s global success,
and particularly in Mexico.
|
3.3
|
Expenses
related to the Transaction
|
FEMSA
expects that the expenses related to the Transaction amount approximately to
US$40 million Dollars.
The
Transaction was approved by the FEMSA Board on December 21, 2009, with the prior
approval and recommendation of FEMSA’s Audit Committee. The FEMSA Board
considered various options and after analyzing the Transaction, recommended to
FEMSA’s shareholders the approval of the Transaction at the FEMSA
Meeting.
The
approval of the Transaction will be submitted to a vote pursuant to the terms of
Article 47 of the Mexican Securities Market Law (Ley del Mercado de Valores)
and FEMSA’s bylaws, at the FEMSA Meeting, which will be held at 12:00pm on April
26, 2010 at the Auditorio Cervecería Cuauhtémoc Moctezuma, S.A. de C.V., located
at Ave. Alfonso Reyes #2202 Norte, in the city of Monterrey, N.L.,
Mexico.
The
Voting Trust, which holds approximately 39% of FEMSA’s shares with voting rights
in the shareholders meeting that will resolve on the Transaction, has agreed to
vote in favor of the Transaction at the FEMSA Meeting.
The
Heineken Supervisory Board has unanimously and unconditionally approved the
Transaction and recommended that Heineken shareholders vote in favor of the
resolution that will be proposed at the Heineken Meeting to approve the
Transaction.
The
Transaction is also conditioned on the Heineken Holding Shareholders
Approval. Heineken Holding, as majority shareholder of Heineken, and
L’Arche Green N.V., as majority shareholder of Heineken Holding, have issued
irrevocable undertakings to FEMSA to vote in favor of the Transaction to be
proposed at the Heineken and Heineken Holding Meeting.
It is
expected that the Closing of the Transaction, once all the conditions have been
met, including obtaining the corresponding governmental authorizations, will
take place during the second quarter of 2010.
3.5
|
Accounting
Treatment of the Transaction
|
For
accounting purposes, at the Closing of the Transaction, FEMSA will lose its
control over the financial and operative policies of FEMSA Cerveza, although it
will have a material influence in the Heineken Group.
Pursuant
to the NIF B-8 “Consolidated or Combined Financial Statements”, due to the loss
of control over the financial and operative policies of FEMSA Cerveza, FEMSA
will be prevented from consolidating the numbers of such business.
Likewise,
pursuant to NIF C-7 “Investments in Affiliates and Other Permanent Investments”,
FEMSA will recognize the results of the year and the variations of other
accounts in the comprehensive income of the year through the recognition of the
equity method in the Heineken Group.
FEMSA
will exchange 100% of its beer operations in Mexico and Brazil for a 20%
interest in the Heineken Group. The difference between the fair
market value of the Allotted Shares, Heineken and Heineken Holding Shares and
the book value of the FEMSA Cerveza, will generate an accounting profit, which
will be recorded net of taxes, at the Closing of the Transaction.
With
these records and disclosures, FEMSA will be in compliance with the terms of NIF
B-8 and NIF C-7 which are the applicable Financial Reporting
Standards.
Under the
section of “Selected Financial Information” relevant entries are shown with
respect to the Consolidated Financial Statements of FEMSA and its subsidiaries,
before and after the effects due to the loss of control of EMPREX
Cerveza. Likewise, under the section of “Management Discussion and
Analysis with Respect to the Results of Operation and the Financial Situation of
the Issuer” the most relevant issues that contribute to the understanding of the
base and pro-forma Consolidated Financial Statements with respect to the
Transaction are discussed.
3.6
|
Tax
Effects of the Transaction
|
At the
Closing of the Transaction, FEMSA will register on its accounting the
correspondent current and deferred taxes that will result from the difference
between the fair market value of the Allotted Shares, Heineken and Heineken
Holding Shares and the tax and accounting values of the Emprex Cerveza shares
respectively.
4. PARTIES
TO THE TRANSACTION
Fomento
Económico Mexicano, S.A.B. de C.V.
4.1.2
|
Business
Description
|
The
information corresponding to this section of the Information Statement is hereby
incorporated by reference to the Annual Report and the Quarterly Report and
FEMSA’s relevant events published in 2009 and 2010, which are available on the
following websites www.femsa.com and
www.bmv.com.mx.
4.1.3
|
Evolution
and Recent Developments
|
The
information corresponding to this section of the Information Statement is hereby
incorporated by reference to the Annual Report and the Quarterly Report and
FEMSA’s relevant events published in 2009 and 2010, which are available on the
following websites: www.femsa.com and
www.bmv.com.mx.
4.1.4
|
Ownership
Structure
|
The
information corresponding to this section of the Information Statement is hereby
incorporated by reference to the Annual Report and the Quarterly Report and
FEMSA’s relevant events published in 2009 and 2010, which are available on the
following websites: www.femsa.com and
www.bmv.com.mx.
There are
no changes to FEMSA’s ownership structure resulting from the
Transaction.
4.1.5
|
Relevant
changes in the Financial Statements since the last Annual
Report
|
On the
next tables we are including the Balance Sheet and Income Statement as of
December 31, 2009 and 2008. They are being included in order to show the main
changes on the financial information since the last Annual Report.
The 2009
Financial Statements are the ones that have been already been audited and that
have been approved by the FEMSA Board and will be submitted for approval by the
FEMSA Meeting
FOMENTO
ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
Consolidated
Balance Sheets
At
December 31, 2009 and December 31, 2008.
Amounts
expressed in millions of Mexican pesos (Ps.).
|
|
|
|
|
|
|
2009
|
2008
|
|
ASSETS
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
Ps.
|
15,523
|
Ps.
|
9,110
|
|
Marketable
securities
|
|
2,113
|
|
-
|
|
Accounts
receivable
|
|
11,732
|
|
10,801
|
|
Inventories
|
|
14,858
|
|
13,065
|
|
Recoverable
taxes
|
|
3,388
|
|
2,951
|
|
Other current
assets
|
|
1,766
|
|
3,060
|
|
Total
current assets
|
|
49,380
|
|
38,987
|
|
Investments in
shares
|
|
2,344
|
|
1,965
|
|
Property, plant and
equipment
|
|
65,038
|
|
61,425
|
|
Bottles and
cases
|
|
4,162
|
|
3,733
|
|
Intangible
assets
|
|
71,181
|
|
65,860
|
|
Deferred taxes
asset
|
|
1,254
|
|
1,247
|
|
Other
assets
|
|
17,732
|
|
14,128
|
|
TOTAL
ASSETS
|
Ps.
|
211,091
|
Ps.
|
187,345
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
Bank loans and notes
payable
|
Ps.
|
3,816
|
Ps.
|
5,799
|
|
Current portion of long-term
debt
|
|
5,037
|
|
5,849
|
|
Interest
payable
|
|
170
|
|
376
|
|
Suppliers
|
|
19,737
|
|
16,726
|
|
Accounts
payable
|
|
7,607
|
|
5,804
|
|
Taxes
payable
|
|
5,793
|
|
4,044
|
|
Other current
liabilities
|
|
3,607
|
|
5,496
|
|
Total
current liabilities
|
|
45,767
|
|
44,094
|
|
Long-Term
Liabilities:
|
|
|
|
|
|
Bank loans and notes
payable
|
|
34,810
|
|
32,210
|
|
Labor
liabilities
|
|
3,354
|
|
2,886
|
|
Deferred taxes
liability
|
|
972
|
|
2,400
|
|
Contingencies and other
liabilities
|
|
10,359
|
|
8,860
|
|
Total
long-term liabilities
|
|
49,495
|
|
46,356
|
|
Total
liabilities
|
|
95,262
|
|
90,450
|
|
Stockholders'
Equity:
|
|
|
|
|
|
Noncontrolling interest in
consolidated subsidiaries
|
|
34,192
|
|
28,074
|
|
Majority
interest:
|
|
|
|
|
|
Capital
stock
|
|
5,348
|
|
5,348
|
|
Additional paid-in
capital
|
|
20,548
|
|
20,551
|
|
Retained earnings from prior
years
|
|
43,835
|
|
38,929
|
|
Net income
|
|
9,908
|
|
6,708
|
|
Cumulative other comprehensive
income
|
|
1,998
|
|
(2,715
|
)
|
Controlling
interest
|
|
81,637
|
|
68,821
|
|
Total
stockholders' equity
|
|
115,829
|
|
96,895
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
Ps.
|
211,091
|
Ps.
|
187,345
|
|
FOMENTO
ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
Consolidated
Income Statements
For the
years ended December 31, 2009 and 2008.
Amounts
expressed in millions of Mexican pesos (Ps.).
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
Net sales
|
Ps.
|
196,103
|
|
Ps.
|
167,171
|
|
Other operating
revenues
|
|
930
|
|
|
851
|
|
Total
revenues
|
|
197,033
|
|
|
168,022
|
|
Cost
of sales
|
|
106,195
|
|
|
90,399
|
|
Gross
profit
|
|
90,838
|
|
|
77,623
|
|
Operating
expenses:
|
|
|
|
|
|
|
Administrative
|
|
11,111
|
|
|
9,531
|
|
Selling
|
|
52,715
|
|
|
45,408
|
|
|
|
63,826
|
|
|
54,939
|
|
Income
from operations
|
|
27,012
|
|
|
22,684
|
|
Other
expenses, net
|
|
(3,506
|
)
|
|
(2,374
|
)
|
Integral
result of financing:
|
|
|
|
|
|
|
Interest
expense
|
|
(5,197
|
)
|
|
(4,930
|
)
|
Interest
income
|
|
565
|
|
|
598
|
|
Foreign exchange (loss) gain,
net
|
|
(396
|
)
|
|
(1,694
|
)
|
Gain on monetary position,
net
|
|
487
|
|
|
657
|
|
Market value loss on ineffective
portion
|
|
|
|
|
|
|
of derivative financial
instruments
|
|
25
|
|
|
(1,456
|
)
|
|
|
(4,516
|
)
|
|
(6,825
|
)
|
Net
income before income taxes
|
|
18,990
|
|
|
13,485
|
|
Income
taxes
|
|
3,908
|
|
|
4,207
|
|
Consolidated
net income
|
Ps.
|
15,082
|
|
Ps.
|
9,278
|
|
Net controlling interest
income
|
|
9,908
|
|
|
6,708
|
|
Net noncontrolling interest
income
|
|
5,174
|
|
|
2,570
|
|
Consolidated
net income
|
Ps.
|
15,082
|
|
Ps.
|
9,278
|
|
Heineken
N.V.
4.2.2
|
Business
Description
|
For
information relating to this section of the Information Statement, see its
annual report available on its website: www.heinekeninternational.com.
4.2.3
|
Evolution
and Recent Developments
|
For
information relating to this section of the Information Statement, including the
events of last year, see its annual report, quarterly reports and additional
information available on its website: www.heinekeninternational.com.
4.2.4
|
Ownership
Structure
|
For
information relating to this section of the Information Statement, see its
annual report available on its website: www.heinekeninternational.com.
4.2.5
|
Relevant
changes in the Financial Statements since the last annual
report
|
For
information relating to this section of the Information Statement, for
reference, see Heineken’s Financial Statements since its latest annual report
available on its website: www.heinekeninternational.com.
Heineken
Holding N.V.
4.3.2
|
Business
Description
|
For
information relating to this section of the Information Statement, see its
annual report available on its website: www.heinekeninternational.com
4.3.3
|
Evolution
and Recent Developments
|
For
information relating to this section of the Information Statement, including the
events of last year, see its annual report, quarterly reports and additional
information available on its website: www.heinekeninternational.com
4.3.4
|
Ownership
Structure
|
For
information relating to this section of the Information Statement, see its
annual report available on its website: www.heinekeninternational.com
4.3.5
|
Relevant
changes in the Financial Statements since the last annual
report
|
For
information relating to this section of the Information Statement, for
reference, see Heineken Holding’s Financial Statements, since its latest annual
report, available on its website: www.heinekeninternational.com
5. RISK
FACTORS
5.1
|
Risk
Factors Relating to FEMSA
|
For
further information related to the risk factors inherent to FEMSA, see the
Annual Report, which is available on the following websites: www.femsa.com and
www.bmv.com.mx.
FEMSA
will not control Heineken’s decisions
As a
consequence of the Transaction, FEMSA will participate in the Heineken Holding
Board and in the Heineken Supervisory Board, however it will not be a majority
or controlling shareholder of Heineken, nor control or materially influence the
decisions of the Heineken Holding Board or the Heineken Supervisory
Board. Therefore, the decisions made by the majority or controlling
shareholders of Heineken or the Heineken Holding Board or the Heineken
Supervisory Board, may not be consistent with or may not consider the interests
of the FEMSA shareholders or be adverse to the interest of FEMSA
shareholders.
Heineken
is present in several markets at the global level
With
respect to the beer industry, FEMSA is currently present only in the Mexican and
Brazilian markets, while Heineken is present in several markets at the global
level. As a consequence of the Transaction, FEMSA shareholders will
be indirectly exposed to the political, economical and social circumstances
affecting the different markets in which Heineken is present, which
might adversely affect the value of FEMSA’s interest in Heineken, and,
consequently, the value of FEMSA shares.
The
Mexican Peso may strengthen
From the
share exchange, FEMSA will exchange an investment in shares in a Mexican company
whose operating currency is the same as the consolidated entity, for an
investment in share of a Dutch company whose operating currency is the euro, and
therefore, in the event of a strengthening of the Mexican Peso with respect to
the euro, the share investment value will be adversely affected.
Furthermore,
the cash flow expected to be received through dividends of this company will be
in euros, and therefore, in the event of a strengthening of the Mexican Peso
with respect to the euro, the amount of expected cash flow once the dividends
are converted into Pesos (the operating currency of FEMSA) will be adversely
affected.
Heineken’s
share price may fall
Heineken
is a listed company whose stock trades publicly and is subject to market
movements. A reduction in the price of Heineken shares would result
in a reduction in the economic value of FEMSA’s participation in
Heineken.
5.2
|
Risk
Factors Relating to the
Transaction.
|
The
competent authorities may not authorize the closing of the
Transaction.
The
Closing is subject to the approval of the antitrust and other authorities in
Mexico the USA and other countries. The Transaction has been already approved by
the antitrust authorities in Mexico, USA, Spain and Italy, however, there are
some other approvals still pending and FEMSA cannot assure that it will obtain
such authorizations or the date in which they will be obtained. If such
governmental authorizations are not obtained or are obtained under terms
unacceptable to FEMSA, FEMSA may not conclude the Transaction, which would have
an adverse and material effect with respect to FEMSA’s business and
operations.
If
FEMSA does not complete the Transaction due to any of Heineken’s Termination
Events, FEMSA shall pay Heineken a material termination fee.
The Share
Exchange Agreement documenting the Transaction includes provisions under which
FEMSA shall pay Heineken a termination fee of US$200 million Dollars, in the
event that Heineken terminates the Share Exchange Agreement due to the fact that
the Transaction is not approved by FEMSA’s shareholders, the FEMSA Board
withdraws or modifies its recommendation to FEMSA’s shareholders to approve the
Transaction or if the FEMSA Board announces its intention of withdrawing or
modifiying its recommendation or approves or announces its intention to approve
an alternate acquisition proposal. Payment of such fee may have an adverse and
material effect on FEMSA’s financial situation and results.
6. SELECTED
FINANCIAL INFORMATION
FINANCIAL
SUMMARY
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Income
Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
Ps. |
196,103
|
|
|
Ps |
167,171
|
|
|
Ps. |
(37,758)
|
|
|
Ps.
|
(35,162) |
|
|
Ps.
|
158,345 |
|
|
Ps.
|
132,009 |
|
Total
revenues
|
|
|
197,033 |
|
|
|
168,022 |
|
|
|
(36,943 |
) |
|
|
(34,394 |
) |
|
|
160,090 |
|
|
|
133,628 |
|
Cost
of sales
|
|
|
106,195 |
|
|
|
90,399 |
|
|
|
(14,163 |
) |
|
|
(12,614 |
) |
|
|
92,032 |
|
|
|
77,785 |
|
Gross
profit
|
|
|
90,838 |
|
|
|
77,623 |
|
|
|
(22,780 |
) |
|
|
(21,780 |
) |
|
|
68,058 |
|
|
|
55,843 |
|
Operating
expenses
|
|
|
63,826 |
|
|
|
54,939 |
|
|
|
(16,886 |
) |
|
|
(16,386 |
) |
|
|
46,940 |
|
|
|
38,553 |
|
Income
from operations
|
|
|
27,012 |
|
|
|
22,684 |
|
|
|
(5,894 |
) |
|
|
(5,394 |
) |
|
|
21,118 |
|
|
|
17,290 |
|
Other
expenses, net
|
|
|
3,506 |
|
|
|
2,374 |
|
|
|
(1,075 |
) |
|
|
(357 |
) |
|
|
2,431 |
|
|
|
2,017 |
|
Comprehensive
financing result
|
|
|
4,516 |
|
|
|
6,825 |
|
|
|
(2,565 |
) |
|
|
(2,143 |
) |
|
|
1,951 |
|
|
|
4,682 |
|
FEMSA
Cerveza Equity Method
|
|
|
- |
|
|
|
- |
|
|
|
2,708 |
|
|
|
2,038 |
|
|
|
2,708 |
|
|
|
2,038 |
|
Income
taxes
|
|
|
3,908 |
|
|
|
4,207 |
|
|
|
1,240 |
|
|
|
(1,099 |
) |
|
|
5,148 |
|
|
|
3,108 |
|
Consolidated
net income for the year
|
|
|
15,082 |
|
|
|
9,278 |
|
|
|
(786 |
) |
|
|
243 |
|
|
|
14,296 |
|
|
|
9,521 |
|
Net
controlling interest income
|
|
|
9,908 |
|
|
|
6,708 |
|
|
|
- |
|
|
|
- |
|
|
|
9,908 |
|
|
|
6,708 |
|
Net
noncontrolling interest income
|
|
|
5,174 |
|
|
|
2,570 |
|
|
|
(786 |
) |
|
|
243 |
|
|
|
4,388 |
|
|
|
2,813 |
|
Ratios
to total revenues (%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
|
46.1 |
% |
|
|
46.2 |
% |
|
|
-3.6 |
% |
|
|
-4.4 |
% |
|
|
42.5 |
% |
|
|
41.8 |
% |
Operating
margin
|
|
|
13.7 |
% |
|
|
13.5 |
% |
|
|
-0.5 |
% |
|
|
-0.6 |
% |
|
|
13.2 |
% |
|
|
12.9 |
% |
Net
income
|
|
|
7.7 |
% |
|
|
5.5 |
% |
|
|
1.3 |
% |
|
|
1.6 |
% |
|
|
8.9 |
% |
|
|
7.1 |
% |
Other
information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
5,596 |
|
|
|
4,967 |
|
|
|
(1,890 |
) |
|
|
(1,713 |
) |
|
|
3,707 |
|
|
|
3,254 |
|
Amortization
and other non cash
Charges
to income from operations
|
|
|
4,482 |
|
|
|
4,031 |
|
|
|
(2,718 |
) |
|
|
(2,538 |
) |
|
|
1,765 |
|
|
|
1,493 |
|
EBITDA
|
|
|
37,091 |
|
|
|
31,682 |
|
|
|
(10,501 |
) |
|
|
(9,646 |
) |
|
|
26,589 |
|
|
|
22,037 |
|
Balance
Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
49,379 |
|
|
|
|
|
|
|
(11,890 |
) |
|
|
|
|
|
|
37,489 |
|
|
|
|
|
Property,
plant and equipment(1)
|
|
|
69,200 |
|
|
|
|
|
|
|
(28,975 |
) |
|
|
|
|
|
|
40,225 |
|
|
|
|
|
Investment
and shares
|
|
|
2,344 |
|
|
|
|
|
|
|
27,568 |
|
|
|
|
|
|
|
29,912 |
|
|
|
|
|
Intangible
assets
|
|
|
71,181 |
|
|
|
|
|
|
|
(19,027 |
) |
|
|
|
|
|
|
52,154 |
|
|
|
|
|
Other
assets
|
|
|
18,987 |
|
|
|
|
|
|
|
1,617 |
|
|
|
|
|
|
|
20,604 |
|
|
|
|
|
Total
assets
|
|
|
211,091 |
|
|
|
|
|
|
|
(30,707 |
) |
|
|
|
|
|
|
180,384 |
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
debt
|
|
|
8,853 |
|
|
|
|
|
|
|
(314 |
) |
|
|
|
|
|
|
8,539 |
|
|
|
|
|
Current
liabilities
|
|
|
36,914 |
|
|
|
|
|
|
|
(9,006 |
) |
|
|
|
|
|
|
27,908 |
|
|
|
|
|
Long-term
debt
|
|
|
34,810 |
|
|
|
|
|
|
|
(13,550 |
) |
|
|
|
|
|
|
21,260 |
|
|
|
|
|
Labor
liabilities
|
|
|
3,354 |
|
|
|
|
|
|
|
(1,578 |
) |
|
|
|
|
|
|
1,776 |
|
|
|
|
|
Deferred
income tax liabilities
|
|
|
972 |
|
|
|
|
|
|
|
(391 |
) |
|
|
|
|
|
|
581 |
|
|
|
|
|
Other
|
|
|
10,359 |
|
|
|
|
|
|
|
(4,503 |
) |
|
|
|
|
|
|
5,856 |
|
|
|
|
|
Total
liabilities
|
|
|
95,262 |
|
|
|
|
|
|
|
(29,342 |
) |
|
|
|
|
|
|
65,920 |
|
|
|
|
|
Stockholders’
equity
|
|
|
115,829 |
|
|
|
|
|
|
|
(1,365 |
) |
|
|
|
|
|
|
114,464 |
|
|
|
|
|
Controlling
interest
|
|
|
81,637 |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
81,637 |
|
|
|
|
|
Noncontrolling
interest
|
|
|
34,192 |
|
|
|
|
|
|
|
(1,365 |
) |
|
|
|
|
|
|
32,827 |
|
|
|
|
|
Financial
ratios (%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
|
|
|
1.089 |
|
|
|
|
|
|
|
(0.050 |
) |
|
|
|
|
|
|
1.039 |
|
|
|
|
|
Leverage
|
|
|
0.822 |
|
|
|
|
|
|
|
(0.247 |
) |
|
|
|
|
|
|
0.576 |
|
|
|
|
|
Capitalization
|
|
|
0.29 |
|
|
|
|
|
|
|
(0.07 |
) |
|
|
|
|
|
|
0.22 |
|
|
|
|
|
Data
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book
value (2)
|
|
|
4.563 |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
4.563 |
|
|
|
|
|
Net
income (3)
|
|
|
0.554 |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
0.554 |
|
|
|
|
|
Number
of outstanding shares (4)
|
|
|
17,891.13 |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
17,891.13 |
|
|
|
|
|
__________________
(1) Includes
bottles and cases.
(2) Controlling
interest divided by the total number of shares outstanding at the end of each
year.
(3) Net
controlling interest income divided by the total number of shares outstanding at
the end of each year.
(4) Total
number of shares outstanding at the end of each year expressed in
millions.
The data
presented herein is included solely for illustrative purposes.
The
purpose of this exercise is to show how the beer business’ operations would have
been reported through the equity method instead of on a consolidated
basis.
In
compliance with NIF C-7 “Investments in Affiliates and Other Permanent
Investments” on the Income Statement the figures corresponding to the beer
business are presented in a single line title “FEMSA Cerveza Equity Method”,
likewise on the Balance Sheet the figures of the beer business were
unconsolidated for each line and its now presented on a netted basis in the line
under title “Investment in Shares”.
An
important clarification is that on the Pro Forma adjustments we are not
including any favorable or adverse effect that may arise from the Transaction or
from efficiencies in the use of cash, reduction of debt, or operative synergies
that may be accomplished.
7. MANAGEMENT
DISCUSSION AND ANALISIS WITH RESPECT TO THE RESULTS OF OPERATION AND THE
FINANCIAL SITUATION OF THE ISSUER
Discussion
and Analysis of Results
FEMSA
ORIGINAL BASE AND PRO FORMA FINANCIAL RESULTS FOR THE TWELVE MONTHS ENDING
DECEMBER 31, 2009 COMPARED TO DECEMBER 31, 2008.
Set forth
below is certain financial information for FEMSA. The information includes base
financial information, which was originally reported by FEMSA, as well as pro
forma financial information, which reflects the financial performance of FEMSA
without consolidating FEMSA Cerveza. In said pro-forma information,
FEMSA Cerveza’s results are recorded under the equity method.
The base
information consists of the main activities divided among the following
consolidated subsidiaries: Coca-Cola FEMSA, S.A.B de C.V. (“Coca-Cola FEMSA” or
“KOF”), which engages in the production, distribution and marketing of soft
drinks; FEMSA Cerveza, which engages in the production, distribution and
marketing of beer and alcoholic beverages; and FEMSA Comercio, S.A. de C.V.
(“FEMSA Comercio” or “Oxxo”), which operates convenience stores.
Pro forma
financial information consists of the main activities, divided among the
following consolidated subsidiaries: Coca-Cola FEMSA, which engages in the
production, distribution and marketing of soft drinks; and FEMSA Comercio, which
operates convenience stores. As mentioned above, FEMSA Cerveza’s
results are recorded under the equity method.
All of
the numbers in this report were prepared in accordance with the NIF. The results
for 2008 and 2009 are stated in nominal Mexican Pesos. The conversion from
Mexican Pesos into U.S. Dollars is included solely for the convenience of the
reader and is determined using the noon buying rate published by the Federal
Reserve Bank of New York, which was 13.0576 Pesos per Dollar on December 31,
2009.
This
report may contain certain forward-looking statements concerning FEMSA’s future
performance that should be regarded as good faith estimates made by FEMSA. These
forward-looking statements reflect FEMSA’s management’s opinions based on
currently available data. Actual results are subject to future events and
uncertainties, which could materially impact FEMSA’s actual
performance.
Total
Revenues
FEMSA’s
pro forma consolidated total revenues increased 19.8% to Ps. 160,090 million in
2009 compared to Ps. 133,628 million in 2008. Double-digit growth in soft drinks
and retail operations contributed favorably to this increase. The increase in
Coca-Cola FEMSA’s total revenues was driven by a higher average price per unit
case and by sales volume growth of 8.3% in 2009. FEMSA Comercio’s increase in
total revenues was mainly driven by the opening of 960 new stores during 2009,
combined with the positive performance of average same-store sales.
2009
Growth compared to 2008
|
|
|
|
|
|
|
Total
Revenues
|
|
|
17.3 |
% |
|
|
19.8 |
% |
Income
from
Operations
|
|
|
19.1 |
% |
|
|
22.2 |
% |
Consolidated
Net
income
|
|
|
62.6 |
% |
|
|
50.2 |
% |
Net
controlling interest
income
|
|
|
47.7 |
% |
|
|
47.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Margin
|
|
|
46.1 |
% |
|
|
42.5 |
% |
|
|
46.2 |
% |
|
|
41.8 |
% |
Operating
income margin
|
|
|
13.7 |
% |
|
|
13.2 |
% |
|
|
13.5 |
% |
|
|
12.9 |
% |
Income
from Operations
FEMSA’s
pro forma consolidated Income from Operations increased 22.1% to Ps. 22,118
million in 2009, driven by the results of Coca-Cola FEMSA and FEMSA Comercio.
Consolidated operating margin increased 0.3 percentage points from 2008 levels,
to 13.2% . The increases in total revenues and gross margin at FEMSA Comercio
offset the pressure related to raw materials in Coca-Cola FEMSA’s
operation.
Net
Income
FEMSA’s
pro forma net income increased 50.2% compared to Ps. 14,296 million in 2009,
which includes equity income of Ps. 2,708 million resulting from the economic
interest of 100% of EMPREX Cerveza. Such consolidated results were driven by (i)
operating income growth throughout the year at Coca-Cola FEMSA and FEMSA
Comercio, and (ii) a significant improvement in the integral result of financing
due to the low comparison base of 2008, due to the depreciation of local
currencies against the US Dollar and a shift to gains in certain derivative
instruments during the year. For the year of 2009, FEMSA’s net majority income
per Unit1 was Ps. 2.77 (US$ 2.12 Dollars per
each American Depositary Share “ADS”).
7.2
|
Financial
Situation, Liquidity and Capital
Resources
|
Consolidated
Net Debt
FEMSA’s
pro forma financial statements show a cash balance of Ps. 16,407 million (US$
1,257 million Dollars) as of December 31, 2009, reflecting strong cash
generation at Coca-Cola FEMSA. Short-term debt was Ps. 8,539 million (US$ 654
million Dollars) and long-term debt was Ps. 21,260 million (US$ 1,628 million
Dollars) resulting in a net debt of Ps. 13,392 million (US$ 1,026 million
Dollars).
8. OFFICERS
The
undersigned state under oath, that in the scope of our corresponding duties, we
prepared the information related to the issuer contained in this Information
Statement, which, to our loyal knowledge and understanding, reflects reasonably
its situation. Also, we state that we do not have knowledge of relevant
information that has been omitted or falsified in this Information Statement or
that it contains information that may induce the investors to
error.
|
By:
José Antonio Fernández Carbajal
Title:
Chief Executive Officer
|
|
By:
Javier Gerardo Astaburuaga Sanjines
Title:
Chief Financial Officer
|
|
By:
Carlos Eduardo Aldrete Ancira
Title:
General Counsel
|
9. EXHIBITS
[UNOFFICIAL
TRANSLATION]
Independent
Auditors’ Report with respect to the review of the Proforma Financial
Information to the Board of Directors and Shareholders of Fomento Económico
Mexicano, S.A.B. de C.V. and Subsidiaries
We have
reviewed the proforma adjustments presented in the operation described in Note 3
and the application of such adjustments to the basic numbers that are presented
in the proforma consolidated balance sheet of Fomento Ecónomico Mexicano, S.A.B.
de C.V. and Subsidiaries (“FEMSA”) as of the 31st day of
December, 2009 and the proforma consolidated income statements for the years
ended on the 31st day of
December of 2009 and 2008, respectively. Such financial statements
result from the consolidated financial statements of FEMSA, which were
previously audited by us as of the 31st day of
December, 2009 and for the years ended in the 31st day of
December, 2009 and 2008, respectively. The proforma adjustments are
based on the assumptions made by the management which are described in Note
4. The proforma financial information is responsibility of the
management of the Company.
Our
review was performed pursuant to the standards for attesting established by the
Mexican Institute of Public Accountants (Instituto Mexicano de Contadores
Públicos). The scope of a review is substantially less than
the scope for an examination. The purpose of an examination is the
expression of an opinion regarding the management assumptions, proforma
adjustments and the application of said adjustements to the basic financial
information and in consequence, we do not issue an opinion to that
effect.
The
purpose of this proforma consolidated financial information is to show which
would have been the important effects on the basic consolidated financial
information of the operation described in Note 3, if such had occurred as of the
date of the consolidated balance sheet containing the basic consolidated
financial information. However, the proforma consolidated financial
statements described in the first paragraph, are not necessarily indicative of
the operation results nor of the corresponding effect in the consolidated
financial position that would have been determined if said operation, would have
actually occurred as of the date of the consolidated balance sheet containing
the basic consolidated financial information.
The
adjustments applied to such proforma financial statements reflect the 100%
interest in FEMSA Cerveza instead of the 20% interest in the enhance Heineken
bussines (including FEMSA Cerveza). Likewise, the adjustments were
prepared under the assumption that a significant influence will be achieved over
the Heineken operations. The estimated adjustments may require
important modifications in order to reflect the actual operation described in
Note 3.
In our
review, we did not find any situation that might makes us believe that any of
the management´ assumptions do not provide reasonable basis in order to present
the important effects attributable to the aforementioned operation which is
described Note 3, neither find evidence that the proforma adjustments do not
reflect the adequate effects of such assumptions or that the column of proforma
figures does not reflect the appropriate application of such adjustments to the
figures presented in the proforma consolidated balance sheet as of the 31st day of
December, 2009 and the proforma consolidated income statements for the years
ended as of the 31st day of
December, 2009 and 2008, respectively.
Mancera,
S.C.
Member
of
Ernst
& Young Global
C.P.C.
Víctor Luis Soulé García
Monterrey,
N.L., México
As of the
22nd
day of march, 2010
FOMENTO
ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
Monterrey,
N.L., México
Consolidated
Balance Sheets
At
December 31, 2009
Amounts
expressed in millions of Mexican pesos (Ps.).
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
Proforma
|
|
|
Unaudited
|
|
|
Audited
|
|
Ajustments
|
|
|
Proforma
|
ASSETS
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
Ps.
|
15,523
|
Ps.
|
(1,229
|
)
|
Ps.
|
14,294
|
Marketable
securities
|
|
2,113
|
|
-
|
|
|
2,113
|
Accounts
receivable
|
|
11,732
|
|
(4,667
|
)
|
|
7,065
|
Inventories
|
|
14,858
|
|
(4,866
|
)
|
|
9,992
|
Recoverable
taxes
|
|
3,388
|
|
(670
|
)
|
|
2,718
|
Other current assets
|
|
1,766
|
|
(458
|
)
|
|
1,308
|
Total
current assets
|
|
49,380
|
|
(11,890
|
)
|
|
37,490
|
Investments in shares
|
|
2,344
|
|
27,568
|
|
|
29,912
|
Property, plant and
equipment
|
|
65,038
|
|
(26,727
|
)
|
|
38,311
|
Bottles and
cases
|
|
4,162
|
|
(2,248
|
)
|
|
1,914
|
Intangible assets
|
|
71,181
|
|
(19,027
|
)
|
|
52,154
|
Deferred taxes
asset
|
|
1,254
|
|
(14
|
)
|
|
1,240
|
Other assets
|
|
17,732
|
|
1,631
|
|
|
19,363
|
TOTAL
ASSETS
|
Ps.
|
211,091
|
Ps.
|
(30,707
|
)
|
Ps.
|
180,384
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
Bank loans and notes
payable
|
Ps.
|
3,816
|
Ps.
|
-
|
|
Ps.
|
3,816
|
Current portion of long-term
debt
|
|
5,037
|
|
(314
|
)
|
|
4,723
|
Interest
payable
|
|
170
|
|
(67
|
)
|
|
103
|
Suppliers
|
|
19,737
|
|
(3,425
|
)
|
|
16,312
|
Accounts payable
|
|
7,607
|
|
(1,648
|
)
|
|
5,959
|
Taxes
payable
|
|
5,793
|
|
(2,528
|
)
|
|
3,265
|
Other current
liabilities
|
|
3,607
|
|
(1,338
|
)
|
|
2,269
|
Total
current liabilities
|
|
45,767
|
|
(9,320
|
)
|
|
36,447
|
Long-Term
Liabilities:
|
|
|
|
|
|
|
|
Bank loans and notes
payable
|
|
34,810
|
|
(13,550
|
)
|
|
21,260
|
Labor
liabilities
|
|
3,354
|
|
(1,578
|
)
|
|
1,776
|
Deferred taxes
liability
|
|
972
|
|
(391
|
)
|
|
581
|
Contingencies and other
liabilities
|
|
10,359
|
|
(4,503
|
)
|
|
5,856
|
Total
long-term liabilities
|
|
49,495
|
|
(20,022
|
)
|
|
29,473
|
Total
liabilities
|
|
95,262
|
|
(29,342
|
)
|
|
65,920
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
Noncontrolling interest in
consolidated subsidiaries
|
|
34,192
|
|
(1,365
|
)
|
|
32,827
|
Majority
interest:
|
|
|
|
|
|
|
|
Capital
stock
|
|
5,348
|
|
-
|
|
|
5,348
|
Additional paid-in
capital
|
|
20,548
|
|
-
|
|
|
20,548
|
Retained earnings from prior
years
|
|
43,835
|
|
-
|
|
|
43,835
|
Net income
|
|
9,908
|
|
-
|
|
|
9,908
|
Cumulative other comprehensive
income
|
|
1,998
|
|
-
|
|
|
1,998
|
Controlling
interest
|
|
81,637
|
|
-
|
|
|
81,637
|
Total
stockholders' equity
|
|
115,829
|
|
(1,365
|
)
|
|
114,464
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
Ps.
|
211,091
|
Ps.
|
(30,707
|
)
|
Ps.
|
180,384
|
FOMENTO
ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
Consolidated
Income Statement
For the
years ended December 31, 2009.
Amounts
expressed in millions of Mexican pesos (Ps.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
Proforma
|
|
|
Unaudited
|
|
|
|
Audited
|
|
|
Ajustments
|
|
|
Proforma
|
|
Net sales
|
Ps.
|
196,103
|
|
Ps.
|
(37,758
|
)
|
Ps.
|
158,345
|
|
Other operating
revenues
|
|
930
|
|
|
815
|
|
|
1,745
|
|
Total
revenues
|
|
197,033
|
|
|
(36,943
|
)
|
|
160,090
|
|
Cost
of sales
|
|
106,195
|
|
|
(14,163
|
)
|
|
92,032
|
|
Gross
profit
|
|
90,838
|
|
|
(22,780
|
)
|
|
68,058
|
|
Operating
expenses:
|
|
|
|
|
-
|
|
|
|
|
Administrative
|
|
11,111
|
|
|
(3,447
|
)
|
|
7,664
|
|
Selling
|
|
52,715
|
|
|
(13,439
|
)
|
|
39,276
|
|
|
|
63,826
|
|
|
(16,886
|
)
|
|
46,940
|
|
Income
from operations
|
|
27,012
|
|
|
(5,894
|
)
|
|
21,118
|
|
Other
expenses, net
|
|
(3,506
|
)
|
|
1,075
|
|
|
(2,431
|
)
|
Integral
result of financing:
|
|
|
|
|
-
|
|
|
|
|
Interest
expense
|
|
(5,197
|
)
|
|
1,179
|
|
|
(4,018
|
)
|
Interest
income
|
|
565
|
|
|
1,322
|
|
|
1,887
|
|
Foreign exchange (loss) gain, net
|
|
(396
|
)
|
|
(35
|
)
|
|
(431
|
)
|
Gain on monetary position,
net
|
|
487
|
|
|
-
|
|
|
487
|
|
Market value gain on ineffective portion
|
|
|
|
|
|
|
|
|
|
of
derivative financial instruments
|
|
25
|
|
|
99
|
|
|
124
|
|
|
|
(4,516
|
)
|
|
2,565
|
|
|
(1,951
|
)
|
FEMSA
Cerveza´s Equity Method
|
|
|
|
|
2,708
|
|
|
2,708
|
|
Net
income before income taxes
|
|
18,990
|
|
|
454
|
|
|
19,444
|
|
Income
taxes
|
|
3,908
|
|
|
1,240
|
|
|
5,148
|
|
Consolidated
net income
|
Ps.
|
15,082
|
|
Ps.
|
(786
|
)
|
Ps.
|
14,296
|
|
Net controlling interest
income
|
|
9,908
|
|
|
-
|
|
|
9,908
|
|
Net
noncontrolling interest income
|
|
5,174
|
|
|
(786
|
)
|
|
4,388
|
|
Consolidated
net income
|
Ps.
|
15,082
|
|
Ps.
|
(786
|
)
|
Ps.
|
14,296
|
|
FOMENTO
ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
Consolidated
Income Statement
For the
years ended December 31, 2008.
Amounts
expressed in millions of Mexican pesos (Ps.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Proforma
|
|
|
Unaudited
|
|
|
|
Audited
|
|
|
Ajustments
|
|
|
Proforma
|
|
Net sales
|
Ps.
|
167,171
|
|
Ps.
|
(35,162
|
)
|
Ps.
|
132,009
|
|
Other operating
revenues
|
|
851
|
|
|
768
|
|
|
1,619
|
|
Total
revenues
|
|
168,022
|
|
|
(34,394
|
)
|
|
133,628
|
|
Cost of
sales
|
|
90,399
|
|
|
(12,614
|
)
|
|
77,785
|
|
Gross
profit
|
|
77,623
|
|
|
(21,780
|
)
|
|
55,843
|
|
Operating
expenses:
|
|
|
|
|
-
|
|
|
|
|
Administrative
|
|
9,531
|
|
|
(3,392
|
)
|
|
6,139
|
|
Selling
|
|
45,408
|
|
|
(12,994
|
)
|
|
32,414
|
|
|
|
54,939
|
|
|
(16,386
|
)
|
|
38,553
|
|
Income from
operations
|
|
22,684
|
|
|
(5,394
|
)
|
|
17,290
|
|
Other expenses,
net
|
|
(2,374
|
)
|
|
357
|
|
|
(2,017
|
)
|
Integral result of
financing:
|
|
|
|
|
-
|
|
|
|
|
Interest
expense
|
|
(4,930
|
)
|
|
841
|
|
|
(4,089
|
)
|
Interest
income
|
|
598
|
|
|
533
|
|
|
1,131
|
|
Foreign exchange (loss) gain,
net
|
|
(1,694
|
)
|
|
263
|
|
|
(1,431
|
)
|
Gain on monetary position,
net
|
|
657
|
|
|
-
|
|
|
657
|
|
Market value loss on ineffective
portion
|
|
|
|
|
|
|
|
|
|
of
derivative financial instruments
|
|
(1,456
|
)
|
|
506
|
|
|
(950
|
)
|
|
|
(6,825
|
)
|
|
2,143
|
|
|
(4,682
|
)
|
FEMSA Cerveza´s Equity
Method
|
|
|
|
|
2,038
|
|
|
2,038
|
|
Net income before income
taxes
|
|
13,485
|
|
|
(856
|
)
|
|
12,629
|
|
Income
taxes
|
|
4,207
|
|
|
(1,099
|
)
|
|
3,108
|
|
Consolidated net
income
|
Ps.
|
9,278
|
|
Ps.
|
243
|
|
Ps.
|
9,521
|
|
Net controlling interest
income
|
|
6,708
|
|
|
-
|
|
|
6,708
|
|
Net noncontrolling interest
income
|
|
2,570
|
|
|
243
|
|
|
2,813
|
|
Consolidated net
income
|
Ps.
|
9,278
|
|
Ps.
|
243
|
|
Ps.
|
9,521
|
|
FOMENTO
ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
Notes
to the Unaudited Proforma Consolidated Financial Statements
Note
1. Base Financial Statements.
The Base
consolidated financial statements include the financial statements of Fomento
Economico Mexicano S.A.B, de C.V.(“FEMSA”) and those companies over which it
exercises control. All intercompany account balances and transactions have been
eliminated in consolidation.
The
consolidated financial statements of FEMSA and subsidiaries (the “Company”) were
prepared in accordance with Normas de Información Financiera (“Mexican Financial
Reporting Standars or Mexican FRS”) and were used as the basis for presenting
the proforma adjustments mentioned in note 4, of recording the Beer Business (as
defined below) as valued through the equity method.
Note
2. Activities of the Company.
FEMSA is
a Mexican holding company. The principal activities of the Company, as an
economic unit, are carried out by operating companies, which are grouped under
various direct and indirect subsidiaries of FEMSA (the “Subholding Companies”).
The following is a description of such activities, together with the ownership
interest in each Subholding Company:
Subholding
Company
|
%
Ownership
|
Activities
|
Coca-Cola
FEMSA, S.A.B. de C.V. and Subsidiaries
|
53.7%
(63.0%
of the shares with voting rights)
|
Production,
distribution and marketing of certain Coca-Cola trademark beverages in
Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela,
Brazil and Argentina. The Coca-Cola Company indirectly owns 31.6% of
Coca-Cola FEMSA’s capital stock. In addition, shares representing 14.7% of
Coca-Cola FEMSA’s capital stock are traded on the Bolsa Mexicana de
Valores (“Mexican Stock Exchange” or “BMV”) and The New York Stock
Exchange, Inc. (“NYSE”).
|
FEMSA
Cerveza, S.A. de C.V. and Subsidiaries
|
100%
|
Production,
distribution and marketing of beer through its principal subsidiary,
Cervecería Cuauhtémoc Moctezuma, S.A. de C.V., which operates six plants
throughout Mexico and eight plants in Brazil through its subsidiary
Cervejarías Kaiser Brasil, S.A. (the “Beer Business”) It produces and
distributes different brands of beer, of which the most significant in
terms of sales are: Tecate, Tecate Light, Sol, Carta Blanca in Mexico, and
Kaiser and Bavaria in Brazil.
|
FEMSA
Comercio, S.A. de C.V. and Subsidiaries
|
100%
|
Operation
of a chain of convenience stores in Mexico under the “OXXO”
name.
|
Other
companies
|
100%
|
Production
and distribution of labels, plastic cases, coolers and commercial
refrigeration equipment; as well as transportation, logistics and
maintenance services to subsidiaries and to third parties.
|
Note
3. Strategic Exchange of Shares of the Beer Business with Heineken.
On
January 11 2010, FEMSA and Heineken Group entered into a share exchange
agreement in order to exchange 100% of its beer business operations in Mexico
and Brazil owned through its subsidiary Emprex Cerveza for a 20% economic
interest in the Heineken Group, by the signing and execution of the appropiate
documentation which provide for the fulfillment of several conditions customary
in transactions of this nature.
Under the
terms of the agreement, FEMSA will receive 86,028,019 new shares of Heineken
Group (43,018,320 new shares of Heineken Holding and 43,009,699 new Heineken
shares) and 29,172,502 additional Heineken shares will be delivered later during
a period not to exceed five years pursuant to a delivery instrument. All this,
will give to FEMSA an economic interest of 20% in Heineken Group,
nonetheless during the period of the delivery instrument the Company will be
subject to all the economic benefits as well as the risks an
obligations of the Heineken Group as if such shares were have been delivered at
he moment that the transaction is approved. In addition, Heineken will assume
debt of US$2.1 billion Dollars, including unfunded obligations of FEMSA
Cerveza’s pension plan.
As
described above, Femsa Cerveza’s main activity is the production, distribution
and marketing of beer in Mexico and Brazil, as well as distribution in the
export market, mainly the U.S
This
transaction will combine FEMSA Cerveza brands like Dos Equis, Sol and Tecate
with Heineken’s global distribution platform, as well as their premium brand
portfolio, which includes Heineken, the only truly global beer brand, Amstel,
Cruzcampo y Birra Moretti. Heineken will take a relevant position in the Mexican
and Brazilian beer markets and continue its strengthening at a global
level.
It is
expected that the transaction will close during the first half of 2010 and is
subject to the approval of the relevant regulatory authorities, as well as the
approval of FEMSA’s, Heineken N.V. and Heineken Holding N.V.
shareholders.
Note
4. Assumptions for the Proforma Financial Statements.
Under
Mexican FRS, the preparation of Financial information requires certain
management assumptions and estimates that affect the figures reported in the
financial information and the disclosure on its notes. Such estimates should be
based on the best knowledge of the company’s management; however, the actual
results could differ from such estimates.
The
purpose of the proforma Consolidated Financial Statements is to reflect the
operations of FEMSA Cerveza through the equity method and not on a consolidated
basis, as it has been presented historically.
The
Financial Information shown in the column Audited, represents the audited
historical figures of the Company in compliance with Mexican FRS and is being
used as the base to the application of the proforma adjustments explained as
follows.
The
figures of the FEMSA Cerveza Balance Sheet were substracted from each line and
are being presented in a netted basis in the line of Investment in shares
pursuant to accounting standards, as the valuation of this investment through
the application of the equity method for non consolidated
subsidiaries.
In the
same way, the figures of the FEMSA Cerveza Income Statement were substracted
from each line and are presented in a netted basis in a separate line titled
“FEMSA Cerveza´s equity method.”
These
pro-forma financial statements show how FEMSA’s figures will be presented in the
future, following the approval of the transaction, with the exception of the
impact resulting from the difference between the current 100% ownership in FEMSA
Cerveza and the 20% ownership in the Heineken Group already including 100% of
the operations of FEMSA Cerveza and assuming FEMSA will have significant
influence in the Heineken Group.
Note
5. Issuance of the Base Consolidated Financial Statements
The base
consolidated financial statements and its notes as of December 31st 2009,
and 2008, were approved by the company’s Board of Directors, such statements are
to be approved by the Shareholders at the FEMSA Shareholders´ Meeting that will
be held on April 26th
2010.