The move by Canada's John Labatt and Mexico's Fomento Economico Mexicano SA de CV would immediately give the new company a more than 10% share of the U.S. import market.
The consolidation wasn't fueled mainly by the U.S. market. Labatt was looking to expand in the fast-growing Mexican market, while FEMSA wanted access to Canada and a stronger U.S. presence.
The deal calls for Labatt to pay $510 million to buy 22% of FEMSA Cervesa, FEMSA's beer unit, and gives it rights to acquire 8% more. FEMSA Cervesa will distribute Labatt's brands in Mexico, and Labatt will distribute FEMSA's brands in Canada.
However, it immediately helps in the U.S., where Labatt rival Molson Breweries has seen an increased presence in advertising and promotion since Philip Morris Cos. bought in and turned over U.S. Molson marketing to Miller Brewing Co.
Labatt now handles most marketing through wholly owned Labatt USA, while FEMSA has most of its brands at its Wisdom Import Sales Co. Hill, Holliday, Connors, Cosmopulos, New York, handles Rolling Rock and Labatt. Tecate is handled by DBC Ad Americus, Los Angeles. No agency changes were planned.