--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. (PEP) 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. (KO),
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