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4-Traders Homepage  >  Equities  >  Nyse  >  The Coca-Cola Co    KO

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Mexican Pepsi Bottler Seen Raising $500 Million in Share Offering

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12/06/2012 | 09:08pm CEST

--Company plans to issue shares in Mexico and the U.S.

--Proceeds to pay debt, corporate expenses and investment

--Geupec changing name to Organizacion Cultiba

   By Amy Guthrie 

MEXICO CITY--Mexican bottler of PepsiCo Inc. (>> PepsiCo, Inc.) products Grupo Embotelladoras Unidas SAB (GEUPEC.MX) is moving forward with plans to issue shares in Mexico and the U.S., broadening investor access to the country's thriving beverage industry.

The issuance is expected to raise up to $500 million for Geupec, which is in the process of changing its name to Organizacion Cultiba SAB, to trade under the ticker CULTIBA.MX. According to a prospectus filed with the Mexican Stock Exchange Thursday, Cultiba plans to use the proceeds to pay a $124.9 million syndicated loan from Rabobank and 1.61 billion pesos ($125 million) it owes Banorte. Any excess capital from the offering will be directed toward Cultiba's investment plans and other corporate purposes.

Banorte-Ixe, Credit Suisse, Inbursa and BBVA Bancomer are working the Mexican secondary offering, while Credit Suisse, Merrill Lynch, Pierce, Fenner & Smith Inc. and JPMorgan are working the international primary offering.

Pepsi consolidated its Mexican beverage operations in 2011 under Geupec via a joint venture with Venezuelan Pepsi bottler Empresas Polar. Geupec, soon to be Cultiba, owns 51% of that bottling venture, called Grupo Gepp, while Pepsi owns 20% and Polar owns 29%.

However, under the co-investment contract with Pepsi and Polar, either of those companies have the option to acquire an additional 11% of Grupo Gepp from Cultiba within the 12-month period starting on Sept. 30, 2016. Should Pepsi or Polar exercise that option, Cultiba's majority stake would be reduced to a minority stake.

If that were to happen, then the buyer also would have the option to buy out Cultiba's entire stake in Grupo Gepp, according to the Cultiba prospectus. That would leave Cultiba with its sugar business; the company refines 7.5% of the total sugar volume in Mexico, with a portion of that output supplying most of Pepsi's sweetener needs in the country.

Mexico is the world's seventh-biggest sugar producer, turning out around 5 million tons a year worth $4.2 billion, according to data from the country's sugar chamber.

Sales of carbonated drinks in Mexico totaled 18.7 billion liters worth $12.6 billion in 2011, according to Canadean data cited in the prospectus. Noncarbonated beverage sales reached 7.6 billion liters worth $5.7 billion last year. Jug water sales totaled 22.8 million liters worth $2.1 billion, trailing only jug water sales in the U.S. and China.

For the 12 months through September, Geupec sold 956 million boxes of 8-ounce carbonated and noncarbonated beverages and the equivalent of 1.08 billion boxes of eight-ounce portions of jug water, making it one of the world's biggest distributors of water in the world, according to the Canadean data.

Bottled-water sales thrive in Mexico, as many households use jug water for drinking and cooking rather than water of questionable quality from the tap. Companies such as Geupec deliver the large jugs direct to homes. The country is also among the world's biggest consumers of soda on a per capita basis.

For the 12 months through September, Geupec showed net profit of $30 million on sales of $2.44 billion and $2.36 billion in assets. The company pays an annual dividend to Pepsi and Polar equal to 33% of its revenue from Grupo Gepp.

The 2011 consolidation of the Pepsi network in Mexico was widely applauded by the industry, as it gives the company's soda brands more of a fighting chance against those of Coca-Cola Co. (>> The Coca-Cola Company), whose brands dominate carbonated soda sales in the country.

Mexican bottlers in the Coca-Cola system also have been consolidating, although the network resembles a patchwork quilt with independent bottlers still controlling some territories.

Write to Amy Guthrie at amy.guthrie@dowjones.com

Stocks mentioned in the article : PepsiCo, Inc., The Coca-Cola Company
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Financials ($)
Sales 2016 42 545 M
EBIT 2016 10 166 M
Net income 2016 8 201 M
Debt 2016 27 449 M
Yield 2016 3,04%
P/E ratio 2016 24,42
P/E ratio 2017 22,60
EV / Sales 2016 5,28x
EV / Sales 2017 6,09x
Capitalization 197 145 M
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Number of Analysts 23
Average target price 48,4 $
Spread / Average Target 6,1%
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Ahmet Muhtar Kent Chairman & Chief Executive Officer
James Quincey President & Chief Operating Officer
Kathy N. Waller Chief Financial Officer & Executive Vice President
Eddie R. Hays Chief Technical Officer & Senior Vice President
Edmund R. Steinike Chief Information Officer & Senior Vice President
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