Investors have been expecting two things from FEMSA (FMX)
for some time – entry into the fragmented Brazilian convenience store
(or c-store) market and deployment of some of the company’s sizable cash
pile towards growth. While the agreement between FEMSA and Cosan (CZZ)
announced on Aug 6 achieves the first one (at least in part), it
doesn’t really impact the second expectation to any meaningful extent.
On
balance, the JV with Cosan is a reasonable strategic move. While the
nature of Cosan’s c-store business isn’t going to allow FEMSA to just
replicate its OXXO model in Brazil, at least not initially, it gives the
company a relatively low-risk, low-cost entrance into an important
market and with a strong partner. I continue to like FEMSA as an
investment (and Cosan, too), but this deal won’t move the needle on
financial performance or valuation in the near term.
Click here for more:
FEMSA Makes A Cautious Entry Into The Brazilian C-Store Market
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