Mexico Arca, Contal Merger To Create $80 Million In Synergies
January 25 2011 - 2:27PM
Dow Jones News
The merger of Mexican Coca-Cola bottlers Embotelladores Arca SAB
(ARCA.MX, EMBVF) and Grupo Continental (CONTAL.MX), or Contal, is
expected to generate annual synergies of $80 million by its third
year, company officials said Tuesday.
"We are in the process of preparing all the steps to synergize,
in terms of distribution and production," Arca Chief Executive
Francisco Garza said on a conference call with investors to discuss
the merger, adding that the figure is a conservative estimate.
In response to an analyst's question as to whether plants will
be closed, Garza noted that Arca and Contal "have some facilities
that are close to other ones; that's clear."
Arca and Contal on Monday announced plans to merge into Latin
America's No. 2 Coca-Cola bottler, with annual sales volume above
1.2 billion unit cases. Mexico's Coca-Cola Femsa SAB (KOF, KOF.MX)
is the region's top Coca-Cola bottler.
Among the expected benefits of the merger, Garza and Contal
Chief Executive Miguel Angel Rabago said, are economies of scale,
exchange of best practices, and geographic and product
diversification.
Arca and Contal's former owners will maintain a 76.3% equity
stake in the new company, to be known as Arca Continental.
Coca-Cola Co. (KO) will have a 7.7% share derived from its current
stake in Contal.
The merger still requires shareholder and regulatory approval.
Company officials said they expect Mexico's antitrust commission,
known as Cofeco, to approve the transaction.
Both companies' shares were trading sharply higher on the
Mexican Stock Exchange on Tuesday, with Arca up 13% at 66.90 pesos
($5.53) and Contal up 13% at 42.74 pesos.
-By Paul Kiernan, Dow Jones Newswires; (5255)5980-5178;
paul.kiernan@dowjones.com