Femsa has agreed to pay Interbrew $1.245 billion to unwind their relationship, which Femsa had long complained had hampered sales of its brands. In return Femsa dropped its objection to the AmBev takeover.
Taking back 100% control of the 113-year-old brewery will allow Femsa to reshape its flagging US export drive, possibly alongside a new partner, with Heineken and Coors the two names on most analysts' lips.
"This transaction will also enable us to redefine the approach to our export strategy and increase the growth of our brands in the United States," Femsa chairman Jose Antonio Fernandez said in a statement.
Femsa also said it will explore "alternative strategies for the US market" - hinting at a possible search for a partner for its exports, which are popular in Texas and California, two states with large Latin migrant populations.
Femsa's American Depository Receipts were down 3.1% at $43.47. In Mexico, its shares were down 2.9% to 50.39 pesos.
Femsa said it will issue new shares on the New York and Mexican stock exchanges to finance part of the deal to buy back a 30% stake that Interbrew owns in the Mexican company's beer subsidiary.
In a long-expected unwinding of business dealings between the two brewers, Femsa will also hand its 30% stake in Labbat USA back to Interbrew, freeing up the Mexican brewer to pursue a new export strategy in the United States.
Labatt USA is one of Interbrew's distribution arms in the world's top economy, and Femsa had long been unhappy about sales of its beers under the venture.
The deal between Interbrew and Femsa was apparent as the two partners have long been at loggerheads over their business ventures.
Femsa has long been disgruntled with the growth rate of its beer exports while No. 1 Mexican brewer Grupo Modelo, with brands such as Corona, has seen sales abroad expand at double digit rates for several years.
Modelo, half-owned by Anheuser-Busch, exported five times more beer than Femsa in 2003, mostly to the United States. Femsa's export growth has been weaker for years.
In the short term, Femsa will use $950 million in loans to help pay for the deal to buy out Interbrew.
Permanent funding will include $295 million of cash on hand, the sale of $300 million of peso-denominated notes and proceeds from the issuance of $500 million of shares on the Mexican and New York Stock Exchanges.
The $1.245 billion price tag to unwind its business dealings with Interbrew is close to analysts' previous rough estimates of $1 billion.
The world's No. 3 brewer Heineken and Adoplh Coors Co., the third-largest US beer maker, are the most likely partners to lessen any debt load for Femsa, analysts say.
Femsa, via its soft drinks bottler Coca-Cola Femsa, last year took on a huge chunk of debt to acquire major Latin American bottler Panamco for $2.7 billion plus $880 million of debt. Coca-Cola Femsa is now the world's second largest Coke bottler.
Unwinding the beer alliance will allow Interbrew to go ahead with its planned purchase of a majority stake in Brazil's AmBev which Femsa had threated to block with a court injunction.
Interbrew agreed in March to take control of AmBev in a 9.2 billion-euro tie up that would create the world's biggest brewer by volume, surpassing US rival Anheuser-Busch.
Bad blood between Femsa and Interbrew goes back a couple of years. When Interbrew bought Becks beers in August 2001, Femsa blocked Interbrew's plans to introduce Becks into the Labatt USA distribution system with a court injunction. (Reuters)
