Fitch Ratings believes that the agreement reached by Coca Cola Femsa, S.A.B. de C.V. (KOF) and Grupo Yoli, S.A. de C.V. (Grupo Yoli) to merge their bottling operations does not have any material impact on the credit quality of KOF.
The all share transaction was valued at MXN8.8 billion. The shareholders of Grupo Yoli will receive around 42.4 million of new KOF’s shares (series L) at a value of MXN184 per share. The consolidation of Grupo Yoli will add to KOF’s balance sheet a net debt of approximately MXN1 billion.
Grupo Yoli operates mainly in the states of Guerrero and Oaxaca which includes the territories of Acapulco and Ixtapa Zihuatanejo. The company has two bottling plants and 20 distribution centers. Grupo Yoli had a sales volume of around 99 million units cases in 2012 that generated net revenues and EBITDA of approximately MXN4 billion and MXN814 million, respectively.
KOF’s ratings are supported by the company’s substantial free cash flow generation, solid financial position, ample financial flexibility and strong business profile. The company’s foreign currency Issuer Default Rating (IDR) is higher than the ‘A-‘ country ceiling of Mexico, where the company is domiciled. Transfer and convertibility risks are mitigated by KOF’s strategic relationship with The Coca-Cola Company (KO, rated ‘A+’/Stable) and the explicit and implicit financial support KOF has received from KO; in addition, the ratings consider the geographical diversification of the EBITDA generated outside Mexico, as well as its strong credit profile.
Fitch currently rates KOF as follows
–Foreign Currency IDR ‘A’;
–Local Currency IDR ‘A’;
–National Scale Long Term Rating ‘AAA(mex)’;
–National Scale Short Term Rating ‘F1+(mex)’;
–Senior Notes for USD500 million ‘A’.
The Rating Outlook is Stable.
Additional information is available at ‘www.fitchratings.com’.
Applicable Criteria and Related Research:
–‘Corporate Rating Methodology’, Aug. 8, 2012.
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460
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Fitch Ratings
Primary Analyst
Rogelio Gonzalez
Director
+52-81-8399-9100
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612
Monterrey, N.L., Mexico
or
Secondary Analyst
Viktoria Krane
Director
+1-212-908-0367
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com