Heineken plans to sell Crown Holdings its Mexican packaging business Empaque for $1.225bn to boost its balance sheet and focus its efforts on brewing and selling beer.
The Dutch brewer inherited Empaque when it bought FEMSA’s beer business in 2010 – the packaging company makes cans, crown corks, aluminium closures and glass bottles - and the two parties hope the deal will close by the end of the year.
Empaque reported (mainly inter-company) sales of €405m in 2013 and earnings before interest and tax (EBIT) of €96m; Heineken said the sale would give it a post-tax windfall of around €300m.
Heineken is targeting a net debt/EBITDA ratio (this ratio is debt divided by earnings – an oft-used measure of a firm’s ability to pay back debt) of below 2.5x by the end of 2014.
Provided the transaction goes through, the Dutch brewer said today that its Mexican beer business Cuauhtemoc Moctezuma will remain a key customer due to long-term supply contracts.
Crown Holdings boss ‘excited’ by acquisition
Crown Holdings CEO John Conway said today that buying Empaque would significantly enhance his company's strategic position in beverage cans, both regionally and globally.
Conway said: "We are excited to acquire Empaque and its excellent, well-managed facilities. This transaction will allow us to expand our presence in the growing Mexican market, significantly strengthen our global beverage packaging business and deliver compelling benefits to shareholders."
In North America Crown will become the second-largest beverage can producer behind Ball Packaging, supplying 24bn+ units/year to beer and soft drinks customers.
Heineken looks forward to ‘ongoing partnership’
If the deal closes Crown will supply 62bn beverage cans annually on a global basis and corner a 20% share of sales.
The company says its geographic footprint will also improve, given that 50%+ of beverage can revenue is attributable to faster-growing developing regions, while business with Heineken affiliates will provide stable cash flows.
Jean-François van Boxmeer, Heineken CEO, said: “We are confident that Empaque will flourish under its new ownership and we look forward to our ongoing partnership.”