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Mexican regulators scrutinize $76m UBS brokered Coca-Cola FEMSA share trade

By Ben Bouckley+

21-Feb-2013
Last updated on 21-Feb-2013 at 11:32 GMT

The Coca-Cola Company and Coca-Cola FEMSA jointly acquired Jugos del Valle in 2007. Del Valle later became Coke's first $1bn brand with roots in Latin America
The Coca-Cola Company and Coca-Cola FEMSA jointly acquired Jugos del Valle in 2007. Del Valle later became Coke's first $1bn brand with roots in Latin America

Mexican authorities are reportedly examining a $76m trade brokered by UBS in Coca-Cola FEMSA shares just hours before the firm announced its acquisition of rival bottler Grupo Yoli on January 17.

Bloomberg broke the news today, and said that the trade that day – brokered by UBS and just prior to the $692m takeover announcement – was the biggest in Coca-Cola FEMSA shares since August.

The acquisition of family owned rival and Coca-Cola bottler Grupo Yoli – which will also see bolster its supply chain by taking a further 10.14% stake in Promotora Industrial Azucarera (taking its holding to 36.3% – remains subject to approval by the Mexican antitrust authority.

Grupo Yoli produces and distributes brands such as Coca-Cola, Fanta, Del Valle and Fanta brands mainly in the state of Guerrero in Southwestern Mexico.

Private investigation reported

According to an anonymous source who spoke with the newswire, Mexico’s National Banking and Securities Commission (CNBV) is leading a private investigation into the transaction, after the Mexican Stock Exchange (Bolsa Mexicana de Valores) referred the transaction to that body.

Neither Coca-Cola FEMSA (The Coca-Cola Company’s largest public bottler and the world’s largest franchise bottler) nor UBS have been accused of wrongdoing, said Bloomberg’s source.

BeverageDaily.com contacted investment banking group UBS’s UK press office but were referred to the firm’s spokeswoman in the US, who was unavailable as we went to press, but who declined to comment to Bloomberg.

A Coca-Cola FEMSA spokeswoman told the newswire that the firm didn’t have knowledge of the investigation, and insisted that the January transaction was nothing to do with the company.

Insider trading explained

While there is as yet no suggestion of wrongdoing in the present case, the term ‘insider trading’ is commonly associated with illegal security transactions, although in the US at least it is legal for company officers, directors and employees to buy and sell stock in their own companies.

According to the US Securities and Exchange Commission: “Illegal insider trading generally refers to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, non-public information about the security.”

During an investor presentation at the Santander Conference in January, Coca-Cola FEMSA parent FEMSA said that the wider group produced 2.6bn unit cases of beverages in Latin America, and was the biggest player in all operating regions.

FEMSA employs 177,000 staff and owns 38 beverage bottling plants in LATAM, and holds the second-largest equity stake in Heineken; Coca-Cola FEMSA’s income from operations was $1.444bn in 2011.

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