The Firm recently represented Citigroup and Morgan Stanley, as well as Mexican underwriters Accival and BBVA Bancomer, in an equity offering by Fomento Ecónomico Mexicano, S.A. de C.V. (which is known as FEMSA). FEMSA offered and sold shares (in the form of units) and American Depositary Shares (ADSs) in a global offering with international and Mexican tranches. The global offering, along with a concurrent Mexican offering to FEMSA's controlling shareholder group, raised approximately US$700 million, which FEMSA used to repay bridge loans made to finance the buy back of a 30% minority interest in its beer operations and to repay existing debt. The offering was one of the largest equity offerings by a Mexican company in recent years.
FEMSA is the largest integrated Latin American beverage company, based on total sales in 2004. It is the second largest brewer in Mexico, selling 15 beer brands in Mexico, including Dos Equis, Tecate, Carta Blanca and Sol. It is also the largest Coca-Cola bottler in Latin America and the second largest Coca-Cola bottler in the world. In addition, FEMSA operates Oxxo, the largest convenience store chain in Mexico with more than 3,500 stores at March 31, 2005.
The global offering was unusual in two structural respects. First, the offering incorporated a share allocation program (modeled on a directed share program) under which existing FEMSA shareholders (including holders of ADSs) were entitled, in effect, to a preferential allocation of securities from the underwriters in the global offering up to an aggregate of 50% of the shares to be sold in the global offering. The share allocation program was offered in lieu of shareholders' preemptive rights under Mexican Law, and was approved by FEMSA's shareholders and the Comisión Nacional Bancaria y de Valores (the Mexican Securities Commission). Second, FEMSA has a complex capital structure in that all shareholders hold units comprised of multiple series of shares rather than shares directly. The ADSs sold in the global offering represented BD Units, consisting of one Series B Share, two Series D-B Shares and two Series D-L Shares (all with different voting rights). FEMSA's other capital stock includes B Units, consisting of five Series B Shares, the majority of which are held by the controlling shareholder group.
The Simpson Thacher team for the transaction consisted of Glenn M. Reiter, William B. Brentani, Kirsten Davis, Nancy Mehlman and Wei Cui, former associate Lucia Sanchez and former international associates Juan Irarragorri and Santiago Ferrer-Perez. Mark Lab and Sean Cotton assisted with NASD and blue sky matters.