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FEMSA completes Accelerated Share Repurchase Agreement, and announces new Agreement

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Fomento Económico Mexicano (FEMSA) announces the completion of a previous Accelerated Share Repurchase (ASR) agreement and the initiation of a new ASR. The company completed the repurchase of approximately 3.2 million American Depositary Shares (ADSs) at an average price of $123.27 per ADS, totaling $400 million, as of May 28, 2024. FEMSA has now entered into a new ASR to repurchase up to $600 million worth of its ADSs. The number of shares repurchased will be determined based on the daily volume-weighted average price of the ADSs during the agreement period, with the final settlement expected by Q4 2024.

Positive
  • Completion of a $400 million ASR, repurchasing 3.2 million ADSs.
  • Initiation of a new ASR to buy back up to $600 million of ADSs.
  • Expected final settlement of the new ASR by Q4 2024.
Negative
  • High expenditure on share repurchases, totaling up to $1 billion within a short period.
  • Potential shareholder dilution if the company's financial performance does not improve.

FEMSA has implemented a new Accelerated Share Repurchase (ASR) agreement valued at 600 million USD. This move follows the completion of its March 2024 ASR, where the company repurchased approximately 3.2 million American Depositary Shares (ADSs) at an average price of 123.27 USD per ADS, totaling 400 million USD.

ASRs can be significant for investors as they often signal management's confidence in the company's future prospects and may help boost earnings per share (EPS) by reducing the outstanding share count. This can potentially lead to a higher stock price. However, it's essential to consider the impact on the company's cash reserves and any potential opportunity costs of not using the cash for other investments or debt reduction.

For FEMSA, this new ASR agreement might indicate the company's robust cash flow and financial stability, as it can afford to allocate substantial amounts towards share repurchases. Investors should watch how this impacts the company's long-term investment strategies and balance sheet health.

Another aspect to consider is how these repurchases will affect shareholder value. If the company’s shares are perceived to be undervalued, this could be a strategic move to enhance value for existing shareholders.

Examining the broader market context, share repurchases like FEMSA's ASR can often be a double-edged sword. On one hand, they can lead to immediate stock price appreciation due to perceived positive signals about the company's financial health. On the other hand, excessive reliance on share repurchases can sometimes be viewed skeptically if it appears the company lacks better uses for its cash.

In FEMSA's case, the strategic deployment of 1 billion USD within a few months for share buybacks showcases a considerable commitment to returning value to shareholders. This is particularly noteworthy given the company's diverse operations spanning retail, beverages and logistics. Investors should assess whether this move aligns with the company's growth trajectory and strategic goals.

Moreover, the timing of these repurchases, aiming for completion by the end of 2024, suggests FEMSA's confidence in its operational performance and market conditions over the near term. Investors might consider how this planned absorption of shares could affect market liquidity and the stock's trading dynamics.

MONTERREY, Mexico, June 10, 2024 (GLOBE NEWSWIRE) -- Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA” or the “Company”) (NYSE: FMX; BMV: FEMSAUBD, FEMSAUB) announces today that it has entered into a new derivative instrument in the form of an accelerated share repurchase transaction (“ASR”) to repurchase the Company’s American Depositary Shares (“ADSs”)1. Under the terms of this new ASR, FEMSA has agreed to repurchase up to USD $600 million of its ADSs. The total number of ADSs ultimately repurchased under this ASR will be based on the daily volume-weighted average price of the Company’s ADSs during the term of the ASR and subject to certain limitations. The final settlement of the ASR is expected to be completed, at the latest, in the fourth quarter of 2024.

Additionally, the Company announces the completion of the ASR announced in March 2024, which final delivery of the shares repurchased thereunder was on May 28, 2024. The Company repurchased a total of approximately 3.2 million ADSs at an average price of USD $123.27 per ADS, for a total amount of USD $400 million.

About FEMSA
FEMSA is a company that creates economic and social value through companies and institutions and strives to be the best employer and neighbor to the communities in which it operates. It participates in the retail industry through a Proximity Americas Division operating OXXO, a small-format store chain, and other related retail formats, and Proximity Europe which includes Valora, our European retail unit which operates convenience and foodvenience formats. In the retail industry it also participates though a Health Division, which includes drugstores and related activities and Digital@FEMSA, which includes Spin by OXXO and Spin Premia, among other digital financial services initiatives. In the beverage industry, it participates through Coca-Cola FEMSA, the largest franchise bottler of Coca-Cola products in the world by volume. Across its business units, FEMSA has more than 392,000 employees in 18 countries. FEMSA is a member of the Dow Jones Sustainability MILA Pacific Alliance, the FTSE4Good Emerging Index and the Mexican Stock Exchange Sustainability Index: S&P/BMV Total México ESG, among other indexes that evaluate its sustainability performance.

1 ADS underlying units consist of ten FEMSA BD Units, each representing one Series B Share, two Series D-B Shares and two Series D-L Shares, without par value.


FAQ

What is FEMSA's new ASR agreement announced in June 2024?

FEMSA announced a new ASR agreement to repurchase up to $600 million of its ADSs, with final settlement expected by Q4 2024.

How much did FEMSA spend on the completed ASR as of May 28, 2024?

FEMSA spent $400 million to repurchase approximately 3.2 million ADSs at an average price of $123.27 per ADS.

When is the final settlement of FEMSA's new ASR expected?

The final settlement of FEMSA's new ASR is expected by the fourth quarter of 2024.

What is the stock symbol for FEMSA?

The stock symbol for FEMSA is FMX.

Fomento Económico Mexicano, S.A.B. de C.V.

NYSE:FMX

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210.22B
2.15B
33.53%
0.09%
Soft Drink Manufacturing
Manufacturing
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United States of America
Monterrey