MANAGEMENT’S DISCUSSION & ANALYSIS

Audited Financial Results for the twelve months ended December 31, 2019. Compared to the twelve months ended December 31, 2018.

Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”) is a Mexican holding company. Set forth below is certain audited financial information for FEMSA and its subsidiaries (the “Company” or “FEMSA Consolidated”) (NYSE: FMX; BMV: FEMSA UBD, FEMSA BD). The principal activities of the Company are grouped mainly under the following subholding companies (the “Subholding Companies”): Coca-Cola FEMSA, S.A.B de C.V. (“Coca‑Cola FEMSA” or “KOF”), (NYSE: KOF, BMV: KOFL) which engages in the production, distribution and marketing of beverages, and FEMSA Comercio, S.A. de C.V. (“FEMSA Comercio”), including its Proximity Division operating OXXO, a small-format store chain, a Health Division, which includes all drugstores and related operations, and a Fuel Division, which operates the OXXO GAS chain of retail service stations. Additionally, through its Strategic Businesses unit, it provides logistics, point-of-sale refrigeration solutions and plastics solutions to FEMSA’s business units and third-party clients. The consolidated financial information included in this annual report was prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Beginning on 2019, we adopted the International Financial Reporting Standard 16 – “Leases” (“IFRS 16”) across all our business units.

The 2019 and 2018 results are stated in nominal Mexican pesos (“pesos” or “Ps.”). Translations of pesos into US dollars (“US$”) are included solely for the convenience of the reader and are determined using the noon buying rate for pesos as published by the U.S. Federal Reserve Board in its H.10 Weekly Release of Foreign Exchange Rates as of December 31, 2019, which was 18.8600 pesos per US dollar. This report may contain certain forward-looking statements concerning Company’s future performance that should be considered good faith estimates made by the Company. These forward-looking statements reflect management expectations and are based upon currently available data. Actual results are subject to future events and uncertainties, which could materially impact the Company’s actual performance.

FEMSA Consolidated
2019 amounts in millions of Mexican pesos

	Total Revenues	% Growth vs’18	Gross Profit	% Growth vs’18
FEMSA Consolidated	506,711	7.9%	191,481	9.2%
Coca‑Cola FEMSA	194,471	6.7%	87,507	4.2%
FEMSA Comercio Proximity Division	184,810	10.4%	75,099	14.6%
FEMSA Comercio Health Division	58,922	13.9%	17,645	11.2%
FEMSA Comercio Fuel Division	47,852	2.0%	4,775	12.9%

FEMSA’s consolidated total revenues increased 7.9% to Ps. 506,711 million in 2019 compared to Ps. 469,744 million in 2018. Coca‑Cola FEMSA’s total revenues increased 6.7% to Ps. 194,471 million, driven mainly by healthy pricing, revenue management initiatives across our territories, volume growth in Brazil, the consolidation of recently acquired territories in Guatemala and Uruguay, and a favorable mix effect driven by transactions outperforming volumes in Brazil, Argentina, and Uruguay and an extraordinary income related to an entitlement to reclaim tax payments in Brazil, recognized in the third quarter. FEMSA Comercio – Proximity Division’s revenues increased 10.4% to Ps. 184,810 million, driven by the opening of 1,331 net new OXXO stores combined with an average increase of 5.0% in same-store sales. FEMSA Comercio – Health Division’s revenues increased 13.9% to PS. 58,922 million, driven by the acquisition of Corporación GPF, and the addition of 800 net new stores, including the aforementioned acquisition, partially offset by an average decrease of 3.7% in same-store sales. FEMSA Comercio – Fuel Division revenues increased 2.0% to Ps. 47,852 million in 2019, driven by the addition of 6 total net new stations in the last twelve months, partially offset by a 4.2% decrease in same-station sales.

Consolidated gross profit increased 9.2% to Ps. 191,481 million in 2019 compared to Ps. 175,305 million in 2018. Gross margin increased 50 basis points to 37.8% of total revenues compared to 2018, reflecting gross margin expansion at FEMSA Comercio´s Proximity and Fuel Divisions, partially offset by gross margin contractions at Coca‑Cola FEMSA and FEMSA Comercio’s Health Division.

Consolidated operating expenses increased 8.0% to Ps. 144,329 million in 2019 compared to Ps. 133,594 million in 2018. As a percentage of total revenues, consolidated operating expenses increased from 28.4% in 2018 to 28.5% in 2019.

Consolidated administrative expenses increased 15.1% to Ps. 19,930 million in 2019 compared to Ps. 17,313 million in 2018. As a percentage of total revenues, consolidated administrative expenses increased 20 basis points, from 3.7% in 2018, to 3.9% in 2019.

Consolidated selling expenses increased 6.4% to Ps. 121,871 million in 2019 as compared to Ps. 114,573 million in 2018. As a percentage of total revenues, selling expenses decreased 20 basis points, from 24.3% in 2018 to 24.1% in 2019.

Consolidated income from operations increased 13.4% to Ps. 47,152 million in 2019 as compared to Ps. 41,576 million in 2018. As a percentage of total revenues, operating margin increased 40 basis points, from 8.9% in 2018 to 9.3% in 2019 reflecting margin expansion at FEMSA Comercio’s Proximity and Fuel Divisions, partially offset by an operating margin contraction at Coca‑Cola FEMSA and FEMSA Comercio’s Health Division.

Some of our subsidiaries pay management fees to us in consideration for corporate services we provide to them. These fees are recorded as administrative expenses in the respective business segments. Our subsidiaries’ payments of management fees are eliminated in consolidation and, therefore, have no effect on our consolidated operating expenses.

Net financing expenses increased to Ps. 13,492 million from Ps. 7,380 million in 2018, reflecting the effects of the adoption of IFRS16 accounting rule across our businesses, coupled with a foreign exchange loss related to the effect of FEMSA’s US Dollar-denominated cash position, as impacted by the appreciation of the Mexican peso during 2019, partially offset by an interest income increase of 11.9% to Ps. 3,168 million in 2019, compared to Ps. 2,832 million in 2018.

Income before income taxes and share of the profit in Heineken results decreased 3.7% to Ps. 32,087 million in 2019 compared with Ps. 33,322 million in 2018, reflecting an increase in our income from operations, which was more than offset by the increase in net financing expenses described above.

Our accounting provision for income taxes in 2019 was Ps. 10,476 million, as compared to Ps. 10,169 million in 2018, resulting in an effective tax rate of 32.6% in 2019, as compared to 30.2% in 2018, slightly above our expected medium-term range of 30%.

Consolidated net income was Ps. 28,048 million in 2019 compared to Ps. 33,079 million in 2018, reflecting a non-cash foreign exchange loss related to FEMSA’s U.S. dollar-denominated cash position as impacted by the appreciation of the Mexican peso, coupled with a demanding comparison base in 2018, driven by the results of discontinued operations related to the sale of the operations of Coca‑Cola FEMSA’s in the Philippines. This was partially offset by growth in our income from operations.

Controlling interest amounted to Ps. 20,699 million in 2019 compared to Ps. 23,990 million in 2018. Controlling interest in 2019 per FEMSA Unit ¹ was Ps. 5.78 (US$ 3.07 per ADS).

Coca-Cola FEMSA
Coca‑Cola FEMSA total revenues increased 6.7% to Ps. 194,471 million in 2019, compared to Ps. 182,342 million in 2018. Total revenues were driven mainly by healthy pricing, revenue management initiatives across our territories, volume growth in Brazil, the consolidation of recently acquired territories in Guatemala and Uruguay, and a favorable mix effect driven by transactions outperforming volumes in Brazil, Argentina, and Uruguay. This figure includes extraordinary other operating income related to an entitlement to reclaim tax payments in Brazil recognized in the third quarter. These factors were partially offset by the negative translation effect resulting from the depreciation of most of our operating currencies as compared to the Mexican Peso, combined with volume declines in Argentina, Colombia, and Mexico. On a organic ² basis, total revenues would have increased 5.0%.

Coca‑Cola FEMSA’s gross profit increased 4.3% to Ps. 87,507 million in 2019, compared to Ps. 83,938 million in 2018, with a gross margin contraction of 100 basis points. More stable sweetener and declining PET prices were offset by: i) the reduction of tax credits on concentrate purchased from the Manaus Free Trade Zone, coupled with our temporary decision to suspend such tax credits; ii) higher concentrate costs in Mexico; and iii) the depreciation in the average exchange rate of most of our operating currencies as applied to our U.S. dollar-denominated raw material costs. Gross margin reached 45.0% in 2019.

The components of cost of goods sold include raw materials (principally concentrate, sweeteners and packaging materials), depreciation costs attributable to our production facilities, wages and other employment costs associated with labor force employed at our production facilities and certain overhead costs. Concentrate prices are determined as a percentage of the retail price of our products in the local currency, net of applicable taxes. Packaging materials, mainly PET and aluminum, and HFCS, used as a sweetener in some countries, are denominated in U.S. dollars.

Operating expenses increased 4.8% to Ps. 62,085 million in 2019, compared to Ps. 59,265 million in 2018. Administrative expenses increased 5.4% to Ps. 8,427 million in 2019, compared to Ps. 7,999 million in 2018. Selling expenses increased 4.4% to Ps. 52,110 million in 2019 compared with Ps. 49,925 million in 2018.

Income from operations increased 3.0% to Ps. 25,423 million in 2019 compared to Ps. 24,673 million in 2018. On an organic basis, income from operations grew 2.0%.

FEMSA Comercio - Proximity Division
FEMSA Comercio – Proximity Division total revenues increased 10.4% to Ps. 184,810 million in 2019 compared to Ps. 167,458 million in 2018, primarily as a result of the opening of 1,331 net new OXXO stores during 2019, together with an average increase in same-store sales of 5.0%. As of December 31, 2019, there were a total of 19,330 OXXO stores. As referenced above, OXXO same-store sales increased an average of 5.0% compared to 2018, driven by a 6.1% increase in average customer ticket, partially offset by a 1.0%. decrease in store traffic. On an organic ³ basis, total revenues grew 10.1%. Cost of goods sold increased 7.6% to Ps. 109,711 million in 2019, compared to Ps. 101,929 million in 2018. Gross margin increased 150 basis points to reach 40.6% of total revenues. This increase reflects; i) the sustained growth of the services category, including income from financial services; ii) healthy trends in our commercial income activity; iii) increased and more efficient promotional programs with our key supplier partners and iv) the consolidation of Caffenio, our sole coffee supplier in Mexico, which we now control with 50% share ownership. As a result, gross profit increased 14.6% to Ps. 75,099 million in 2019 compared with 2018.

Operating expenses increased 11.8% to Ps. 57,527 million in 2019 compared to Ps. 51,452 million in 2018. The increase in operating expenses was driven by: i) our continuing initiative to strengthen our compensation structure of key in-store personnel in a tight labor market, including the gradual shift from commission-based store teams to employee-based teams; ii) higher secure cash handling costs driven by increased volume and higher operational costs including fuel prices; iii) the consolidation of Caffenio; and iv) organic growth of OXXO’s international operations that achieved healthy sales levels per store, but have yet to reach sufficient scale to better absorb overhead.

Administrative expenses increased 28.0% to Ps. 4,590 million in 2019, compared to Ps. 3,587 million in 2018; as a percentage of sales, they increased to 2.5% in 2019, from 2.1% in 2018.

Selling expenses increased 10.4% to Ps. 52,545 million in 2019 compared with Ps. 47,589 million in 2018; as a percentage of sales they reached 28.4%.

Income from operations increased 24.8% to Ps.17,572 million in 2019 compared to Ps. 14,077 million in 2018, resulting in an operating margin expansion of 110 basis points to reach 9.5% as a percentage of total revenues for the year, compared with 8.4% in 2018. This increase reflects better operating leverage and the effect of the adoption of IFRS16 accounting rule, partially offset by higher operating expenses as described above. On an organic ³ basis, income from operations grew 24.1%.

FEMSA Comercio - Health Division
FEMSA Comercio – Health Division total revenues increased 13.9% to Ps. 58,922 million compared to Ps. 51,739 million in 2018, reflecting the consolidation of Corporación GPF and the addition of 800 net new stores during 2019. As of December 31, 2019, there were a total of 3,161 drugstores in Mexico, Chile, Colombia and Ecuador. This was partially offset by a same-store sales decrease of 3.7%, reflecting stable trends in Mexico and positive trends in Colombia, that were more than offset by soft trading and operational disruptions in Chile, coupled with a negative currency translation effect related to the appreciation of the Mexican peso compared to the Chilean and Colombian pesos in our operations in South America. On an organic ³ basis, total revenues grew 0.9%.

Cost of goods sold increased 15.1% to Ps. 41,277 million in 2019, compared with Ps. 35,874 million in 2018. Gross margin decreased 80 basis points to reach 29.9% of total revenues.

This was mainly driven by; i) new pricing regulations in Colombia; ii) increased promotional activity in Chile; and iii) the consolidation of Corporación GPF. These were partially offset by improved efficiency and more effective collaboration and execution with our key supplier partners in Mexico. Gross profit increased 11.2% to Ps. 17,645 million in 2019 compared with 2018.

Operating expenses increased 11.7% to Ps. 15,360 million in 2019 compared with Ps. 13,750 million in 2018. This increase was partially offset by cost efficiencies and tight expense control throughout our territories.

Administrative expenses increased 31.8% to Ps. 2,709 million in 2019, compared with Ps. 2,055 million in 2018; as a percentage of sales, they reached 4.6% in 2019. Selling expenses increased 7.8% to Ps. 12,462 million in 2018 compared with Ps. 11,557 million in 2018; as a percentage of sales, they reached 21.1% in 2019.

Income from operations increased 8.0% to Ps. 2,285 million in 2019 compared with Ps. 2,115 million in 2018 while operating margin contracted by 20 basis points to 3.9% as a percentage of total revenues for the year, compared with 4.1% in 2018, which reflects the effect of the adoption of IFRS16 accounting rule coupled with cost efficiencies and tight expense control across our legacy territories, being more than offset by: i) the loss of operating leverage driven by reduced sales in Chile; and ii) the consolidation of Corporación GPF, which has a relatively higher operating expense structure. On an organic ⁴ basis, income from operations increased 0.3%.

FEMSA Comercio - Fuel Division
FEMSA Comercio – Fuel Division total revenues increased 2.0% to Ps. 47,852 million in 2019 compared to Ps. 46,936 in 2018, primarily as a result of the opening of 6 net new OXXO GAS service stations during 2019, partially offset with an average decrease in same‑station sales of 4.2%. As of December 31, 2019, there were a total of 545 OXXO GAS service stations. As referenced above, same-station sales decreased an average of 4.2% compared to 2018, as the average price per liter increased by 6.0%, while the average volume decreased by 9.6% reflecting consumer reaction to the higher prices, and increased competition.

Cost of goods sold increased 0.9% to Ps. 43,077 million in 2019, compared with Ps. 42,705 million in 2018. Gross margin increased 100 basis points to reach 10.0% of total revenues. This increase reflects improved supply terms. As a result, gross profit increased 12.9% to Ps. 4,775 million in 2019 compared with 2018.

Operating expenses decreased 4.8% to Ps. 3,591 million in 2019 compared with Ps. 3,773 million in 2018. The decrease in operating expenses reflects an undemanding comparison base in 2018 driven by provisions related to certain unprofitable institutional clients, partially offset by: i) higher wages implemented to reduce turnover in a tight labor market and; ii) expenses related to the remodeling of our stations and the installation of new environmental controls.

Administrative expenses decreased 11.2% to Ps. 215 million in 2019, compared with Ps. 242 million in 2018; as a percentage of sales, they decreased 10 basis points to 0.4% in 2019. Selling expenses decreased 6.9% to Ps. 3,281 million in 2019 compared with Ps. 3,526 million in 2018; as a percentage of sales, they decreased 60 basis points to 6.9% in 2019.

Income from operations increased significantly to Ps. 1,184 million in 2019 compared with Ps. 458 million in 2018, resulting in an operating margin expansion of 150 basis points to 2.5% as a percentage of total revenues for the year, compared with 1.0% in 2018. This increase reflects the effect of the adoption of IFRS16 accounting rule, coupled with better operating leverage that more than offset higher personnel, remodeling and expansion related expenses.

Key Events during 2019
The following text reproduce our press releases as they were published.

• Coca‑Cola FEMSA announces stock split and listing of shares in the form of units

On January 31, 2019, Coca‑Cola FEMSA announced that it held an Extraordinary General Shareholders’ Meeting (the “Shareholders’ Meeting”) that resolved the following: (i) An eight-for-one stock split (the “Stock Split”) of each series of shares of the Company; (ii) The issuance of Series B ordinary shares with full voting rights; (iii) The creation of units, comprised of 3 Series B shares and 5 Series L shares, to be listed for trading on the Mexican Stock Exchange (“BMV”) and in the form of American depositary shares (ADSs) on the New York Stock Exchange (“NYSE”); and (iv) Amendments to the Company’s bylaws mainly to give effect to the matters approved in paragraphs (i), (ii), and (iii), described above.

“As part of a thorough and disciplined long-term planning process, and aware that the existing capital structure of Coca‑Cola FEMSA has limited capacity to issue Series L shares, we proposed to our shareholders a stock split and the issuance of Series B shares to be listed together with Series L shares in the form of units, to allow the Company to increase its capacity to issue new equity, which may be used as consideration in future share-based acquisitions, as well as for general corporate purposes ”, said John Santa Maria Otazua, Coca‑Cola FEMSA’s Chief Executive Officer. He added: “It’s important to stress that these adjustments do not change the percentage of ownership currently held by the Company’s shareholders; in addition, the Series B shares comprised in the units will provide additional voting rights to minority shareholders. We will continue to leverage on a disciplined approach to capital allocation and we feel confident that the listing of Series L shares and Series B shares in the form of units will help unlock value for our shareholders and position Coca‑Cola FEMSA for new growth opportunities.”

• OXXO and HEINEKEN Mexico extend their commercial relationship

On February 26, 2019, FEMSA announced that its subsidiary Cadena Comercial OXXO, S.A. de C.V. (“OXXO”) had signed an agreement with Cervezas Cuauhtémoc Moctezuma, S.A. de C.V. (“HEINEKEN Mexico”), and both companies had agreed to an extension of their existing commercial relationship, with certain important changes. The current successful commercial relationship between OXXO and HEINEKEN Mexico began in 2010 and has been conducted under a ten-year agreement, whereby the only beer brands sold by OXXO have been those of the HEINEKEN Mexico portfolio. This announcement represents an early renegotiation of the agreement with HEINEKEN Mexico.

Under the terms of this agreement, starting in April of 2019 and following a gradual process, OXXO started selling the beer brands of Grupo Modelo in certain regions of Mexico, and will cover the entire Mexican territory by the end of 2022. As an example, the markets where OXXO will start selling both brand portfolios simultaneously during 2019 include Guadalajara and Mexico City.

The new commercial agreement will increase the productivity of the beer category within OXXO stores and will contribute to the growth of the beer industry in Mexico. Furthermore, the agreement is consistent with OXXO’s permanent efforts to evolve its value proposition, committed to its consumers and offering more and better solutions to their daily needs.

• OXXO and Grupo Modelo agree on new commercial relationship

On February 26, 2019, FEMSA announced that its subsidiary Cadena Comercial OXXO, S.A. de C.V. (“OXXO”) has signed an agreement with Grupo Modelo containing the terms for a new commercial relationship to sell the beer brands of Grupo Modelo at OXXO stores.

Currently, OXXO sells only the beer brand portfolio of HEINEKEN Mexico. Under the terms of the agreement announced today, starting in April of 2019 and following a gradual process, OXXO will also start selling the beer brands of Grupo Modelo in certain regions of Mexico, and will cover the entire Mexican territory by the end of 2022. As an example, the markets where OXXO will start selling both brand portfolios simultaneously during 2019 include Guadalajara and Mexico City.

The new commercial agreement will increase the productivity of the beer category within OXXO stores and will contribute to the growth of the beer industry in Mexico. Furthermore, the agreement is consistent with OXXO’s permanent efforts to evolve its value proposition, committed to its consumers and offering more and better solutions to their daily needs.

• FEMSA Comercio completes acquisition of Corporación GPF in Ecuador

On April 30, 2019, FEMSA announced that FEMSA Comercio through its majority-owned subsidiary Socofar, had successfully completed the acquisition of Corporación GPF (“GPF”). GPF is a leading drugstore operator based in Quito, Ecuador, with almost 90 years of solid trajectory, which operated more than 620 points of sale nationwide mainly under the Fybeca and SanaSana banners.

This transaction represents a new building block of FEMSA Comercio’s drugstore strategy in South America, following its successful acquisition of a controlling stake in the drugstore and distribution platform of Chile-based Socofar in 2015. This announcement marks another important step for FEMSA Comercio as it brings its considerable retail expertise and Socofar’s deep industry knowledge to the Ecuadorian market and its more than 16 million consumers. GPF is a strong local operator with attractive growth prospects, and it will help Socofar as it continues to build a robust base from which to expand further in the region.

• FEMSA Comercio enters Convenience sector in Brazil through Joint Venture with Raízen

On August 6, 2019, FEMSA announced that it had reached an agreement to enter into a 50-50 Joint Venture with Raízen. Through this agreement, FEMSA Comercio acquired a 50% interest in Raízen Conveniências. The full Enterprise Value of Raízen Conveniências for the purpose of this transaction was R$1,122 million, free of any debt or cash, and FEMSA Comercio’s 50% interest was therefore valued at R$561 million. Raízen itself is a 50-50 Joint Venture between Cosan and Shell. Raízen currently operates more than 6,200 Shell service stations in Brazil, and approximately one thousand of them have a Select brand convenience store today. The stores are franchised or licensed by Raízen to independent operators. This Joint Venture is limited to the convenience store business and excludes the fuel service station operations. The transaction will create a powerful platform for future growth. Raízen contributes its broad service station footprint, where current penetration of convenience stores is still low, and its vast experience operating in Brazil. FEMSA Comercio will bring to bear its considerable expertise as a developer and operator of small-format proximity and convenience stores. Potential growth avenues include increasing penetration of Select convenience stores at Raízen service stations, as well as developing successful value propositions for stand-alone stores under the OXXO brand.

Daniel Rodríguez Cofre, FEMSA Comercio’s CEO, commented:
“We have been looking at Brazil as a compelling market for small-format retail for a long time. The transaction announced today combines the right asset and the right partner for us, with the right structure and the right timing. We welcome the opportunity to join forces with a world-class company like Raízen, and we are excited by the potential and the challenge that this new venture represents for FEMSA Comercio.”

This transaction was successfully closed on November 1, 2019.

• FEMSA to invest in US cash and carry leader Jetro Restaurant Depot, creating a Joint Venture for Latin America

On September 26, 2019, FEMSA announced that it had signed a non-binding Memorandum of Understanding (“MOU”) to acquire a minority stake in privately-held Jetro Restaurant Depot (“JRD”). The MOU also contemplates that FEMSA and JRD will enter into a Joint Venture to take JRD’s business model to Mexico and other Latin American markets. The amount of FEMSA’s investment as per the MOU is US$ 750 million.

Jetro Restaurant Depot
JRD is a leader in the wholesale business-to-business cash and carry retail foodservice segment in the United States. Founded in 1976, JRD today operates over 130 stores across the United States with two formats, Jetro Cash and Carry and Restaurant Depot, with revenues exceeding US$ 10 Billion in 2018.

Transaction Rationale
We believe the transaction fits well with our strategic intent to invest in growth opportunities that can leverage our capability set across different markets, while providing the opportunity for attractive risk-adjusted returns. The transaction allows FEMSA to gain exposure to the US wholesale cash and carry segment by investing with a formidable partner, and at the same time creates the platform for a new Joint Venture to develop and grow this business in FEMSA’s core markets.

This transaction was successfully closed on November 8, 2019.

• Coca‑Cola FEMSA announces favorable resolution of arbitration on beer distribution in Brazil

On October 31, 2019, Coca‑Cola FEMSA announced that the arbitration tribunal in charge of the process to resolve disagreements between Cervejarias Kaiser Brasil, S.A. a subsidiary of Heineken, N.V. (“Kaiser”), and the Coca‑Cola System in Brazil, in connection with the distribution of Kaiser’s portfolio including Heineken beer, had issued an award confirming that their distribution agreement shall continue in full force and effect until and including March 19, 2022. We will continue distributing Kaiser’s portfolio, performing and executing at our customary levels of excellence.

• Solistica announces the acquisition of AGV, leader in value-added warehousing and distribution in Brazil

On November 8, 2019, FEMSA announced that Solistica, FEMSA’s logistics subsidiary, had reached an agreement to acquire AGV, a leader in value-added warehousing and distribution in Brazil with gross annual sales approaching R$650 million.

About AGV
Founded in 1998, AGV operates a value-added warehousing and distribution platform with more than 300,000 m2 of warehousing space located across 15 states in Brazil and over 2,600 employees. Within its broad platform, AGV has built a particularly strong position in Brazil’s health and nutrition-related sector, as well as in fast-moving consumer goods, which fit well with Solistica’s existing capabilities and customer focus.

Transaction Rationale
This transaction represents an important new building block for Solistica’s strategy in Brazil. Solistica will now become the first fully integrated Third Party Logistics (3PL) solution provider in the Brazilian market, building a key differentiating factor among the leading players in the industry. Since the acquisitions of Expresso Jundiai and Atlas in 2013 and 2015, respectively, Solistica has developed its portfolio of services to become a major player in Less than Truckload (LTL) logistics in Brazil. AGV will generate synergies, complement the platform and significantly enhance Solistica’s customer value proposition, allowing it to provide integrated logistics solutions to its clients in the key Brazilian market.

This transaction was successfully closed on December 27, 2019.

• FEMSA Becomes Sole Shareholder of Grupo Socofar

On December 23, 2019, FEMSA announced that its minority partner in Grupo Socofar (“Socofar”) had notified to FEMSA Comercio the exercise of its put right to sell its remaining 40% interest in Socofar. Upon closing of this transaction, FEMSA, through its subsidiaries, would become the sole shareholder of Socofar. Per the terms of the put option, the valuation for Socofar was determined through a fair market procedure carried out by independent investment bankers, and the final price to be paid for the 40% interest is subject to local currency exchange adjustments to be made at closing.

This transaction was successfully completed on January 9, 2020, and it represents another successful milestone in FEMSA Comercio’s long-term effort to build a leading regional drugstore platform, and it will create more opportunities for the operations in South America and Mexico to collaborate and generate value together.