Australia Markets open in 6 hrs 48 mins

FEMSA Comercio to Expand in Brazil With 50% Stake in Raizen

Zacks Equity Research

Fomento Económico Mexicano, S.A.B de C.V. FMX, alias FEMSA, recently agreed to form a 50-50 joint venture (JV) with Raízen Conveniencias in Brazil. The deal enables FEMSA Comercio to buy a 50% stake in Raízen for R$561 million. The total enterprise value of Raízen Conveniencias is R$1,122 Million, without any debt or cash.

The deal, which is likely to close in the second half of this year, is expected to mark FEMSA Comercio’s entry in Brazil’s convenience sector. However, it is subject to customary regulatory approvals. Through this partnership, FEMSA Comercio will gain from Raízen’s knowledge and experience of operating in Brazil. Further, Raízen’s broad service station footprint in areas where penetration of convenience stores is low is likely to prove beneficial. Meanwhile, FEMSA Comercio will offer its expertise as a developer and operator of small-format proximity and convenience stores.

The transaction will also focus on increasing penetration of Select convenience stores at Raízen service stations. Also, the JV will help in developing value propositions for the OXXO brand’s stand-alone outlets. The deal is restricted to the convenience store business and does not include the fuel service station operations.

Notably, Raízen, which is the third-largest energy company in Brazil, is a 50-50 JV between Cosan and Shell. At present, Raízen operates above 6,200 Shell service stations in Brazil, out of these nearly one thousand have a Select brand convenience store. These outlets are franchised or licensed to independent operators.

FEMSA remains focused on expanding its operations in new markets and reinforcing the small-box retail segment. To this end, FEMSA’s Cadena Comercial OXXO (OXXO stores) signed a commercial pact to sell Anheuser-Busch InBev’s BUD subsidiary, Grupo Modelo’s beer brands. Further, FEMSA extended the existing commercial pact with Heineken N.V. HEINY Mexico for another five years.

This Zacks Rank #2 (Buy) company is also expanding its drugstore operations as it sees significant potential in that space. Additionally, FEMSA is on track with its efforts to build infrastructure and integrate its four legacy drugstore operations into a single operating platform.

Despite these positives and strategic efforts, FEMSA stock has underperformed the industry year to date. While the stock has inched up 1%, the industry rallied 7.7%.


 

Another stock worth considering in the soft drinks space is PepsiCo, Inc. PEP, which has an expected long-term earnings growth rate of 7% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

This Could Be the Fastest Way to Grow Wealth in 2019

Research indicates one sector is poised to deliver a crop of the best-performing stocks you'll find anywhere in the market. Breaking news in this space frequently creates quick double- and triple-digit profit opportunities.

These companies are changing the world – and owning their stocks could transform your portfolio in 2019 and beyond. Recent trades from this sector have generated +98%, +119% and +164% gains in as little as 1 month.

Click here to see these breakthrough stocks now >>


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
 
Anheuser-Busch InBev SA/NV (BUD) : Free Stock Analysis Report
 
Heineken NV (HEINY) : Free Stock Analysis Report
 
Pepsico, Inc. (PEP) : Free Stock Analysis Report
 
Fomento Economico Mexicano S.A.B. de C.V. (FMX) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.