Heineken wins battle for Sol brewer as SAB walks away

Dutch brewer hails the deal as next phase in emerging market expansion

Heineken has agreed to buy the Mexican brewer of Sol beer after rival SABMiller walked away from the bidding, in a €5.3bn deal it hopes will "transform" its operations in Latin America.

Heineken, the world's second largest brewer by revenues, yesterday announced it had secured the beer operations of Fomento Económico Mexicano SAB (Femsa) in an all-share deal.

Jean-François van Boxmeer, chairman and chief executive of the Dutch brewer, said the buy "transforms our future in the Americas and marks the next stage in Heineken's strong association with Femsa. Through this deal we become a much stronger, more competitive player in Latin America, one of the world's most profitable and fastest-growing beer markets."

Based upon the group's closing price of €32.92 on Friday, the equity value of the deal is €3.8bn. The total value of Femsa Cerveza rises to €5.3bn including net debt and pension obligations.

One brewing industry analyst said: "The deal is less expensive than had been rumoured, and the synergies outlined are higher than expected."

The takeover of Femsa Cerveza, which also owns the Dos Equis brand, included all of the group's Mexican beer operations and its Brazilian beer business, in which Heineken already owned a minority stake.

Favourite SABMiller pulled out of the auction at the 11th hour, according to people close to the deal, leaving the way clear for Heineken. It is understood that the group was not interested in Femsa's Brazilian operation and was prepared to table a deal worth $7bn, which excluded the business. SAB, which declined to comment, walked away after it emerged that a deal without the Brazilian arm "was not viable".

José Antonio Fernández Carbajal, chairman and chief executive of Femsa, said Heineken presented "the most compelling opportunity to transform our brewing assets".

The deal will provide Femsa with a 20 per cent stake in Heineken. The Mexican group will also appoint two non-executive directors to the board.

Heineken, which bought brands including John Smith's and Foster's from Scottish & Newcastle in 2008, has earmarked cost savings of €150m by 2013, but analysts were concerned that the deal wouldn't deliver "positive economic profit" for six years.

Femsa has a 43 per cent share of the Mexican market, the fourth largest in the world. It also strengthens Heineken in the "highly profitable" import market into the US, especially in its growing Hispanic population. In Brazil, the group has a 9 per cent share.