Whenever there's talk about Dutch brewer Heineken making a major acquisition, the same question arises: how can the deal be financed while securing the Heineken family's controlling stake? The family holds its stake through a majority stake in Heineken Holding, which in turn holds a majority stake in Heineken.
These days, there's talk of Heineken acquiring Femsa, the giant Mexican brewer. BreakingViews has some interesting ideas on how Heineken could raise EUR 3bn in equity while avoiding too much dilution of the Heineken family's stake:
To maintain its controlling stake in the brewer, Heineken Holding would need to find just over 1 billion euros to exercise its rights to buy stock. To raise the cash, Heineken Holding, which is also publicly traded, could kick off its own rights issue.
And here’s the bonus for the Heineken family. Even if it did not want to stump up for more Heineken Holding stock, it would still cling to control. Again assuming a rights issue at a 10 percent discount, its ownership of Heineken Holding would drop to 50.1 percent.
That might not send a reassuring message to shareholders, so the Heinekens might feel compelled to buy more shares in Heineken Holding as a show of faith in Heineken’s prospects.
Then over time they could divert some of Heineken Holding’s dividend payouts toward stock buybacks, which would allow the family to rebuild its stake over time without having to dip further into its deep pockets.
An obvious solution perhaps, but clever nonetheless.