Mexico's Coca-Cola Femsa ditches plans to buy U.S. operations
MEXICO CITY - Mexico's Coca-Cola Femsa <KOFL.MX>, the world's largest Coke bottler, said on Tuesday it has abandoned plans to acquire certain territories in the United States after thorough analysis and negotiations with The Coca Cola Company <KO.N>.
Coca-Cola Femsa, a joint venture between Coca-Cola Co and Mexican bottler and retailer Fomento Economico Mexicano (Femsa), said it would continue evaluating acquisitions of other available territories operated by Coca-Cola's Bottling Investments Group.
Last July, KOF said it was ready to jump on "the next wave of inorganic growth through an agreement to evaluate, preferentially, the acquisition of certain territories within the Bottling Investments Group," including U.S. operations.
Femsa executives said in February, however, that the company would carefully watch the exchange rate and policies that U.S. President Donald Trump could adopt including his plan to update or scrap the North American Free Trade Agreement.
In a client note on Tuesday, Santander said KOF has been evaluating a move into California since the second half of 2016 which it described as a "risk," given taxes on sugary beverages in certain counties and rising labor costs.
KOF's decision not to enter the American market "will have a positive impact on the share price, since it shows management is willing to make hard decisions if they don't add value for shareholders," Santander said.
Coca-Cola Femsa shares were trading up 1.64 percent at 148 pesos per share in mid-day trading.
Mexican direct investment in the United States totaled $16.6 billion in 2015 according to U.S. government data. REUTERS