Coca-Cola FEMSA Acquires Panamerican Beverages

Coca-Cola FEMSA acquires Panamerican Beverages, Inc. (Panamco). Coca-Cola FEMSA is the largest bottler of Coca-Cola and other soft drinks in Mexico and, after the acquisition, will be the largest in Latin America and second-largest Coca-Cola bottler in the world. The cost of the transaction is US$3.6 billion. The transaction, subject so shareholder, regulatory, and other consents, conditions and approvals, is expected to close in the first half of 2003.

Cleary, Gottlieb, Steen & Hamilton is representing Coca-Cola FEMSA. The Cleary M&A team on the matter includes Ethan Klingsberg, Paco Cestero, Ethan Skerry, Yavor Efremov, Willa Ghitelman, Hugo Sueiro and Diego Martínez Cantu. In addition, during the last several months Doron Lipshitz, Peter Leube, Bill Candelaria, Steve Planchard and Rod Branch have made major contributions on M&A matters. Ana Demel, Duane McLaughlin, Paco Cestero and Claudio DiFalco are leading the negotiation of the acquisition financing arrangements. Jaime El Koury and Paco Cestero negotiated the numerous side arrangements with Coca-Cola. Bob Raymond and Chris Bellanca are handling benefits matters. Les Samuels and David Chung are handling tax matters. Brian Byrne and Stephanie Hallouet are providing antitrust advice. Max Gitter, Boaz Morag, Sheilah Kane and Jonathan Lloyd have been instrumental on litigation related diligence and advice.

In addition to the merger agreement, the Cleary team negotiated support agreements with key Class B shareholders and Coca-Cola, as well as an additional set of operational and governance agreements with Coca-Cola.

Davis Polk & Wardwell is advising J.P. Morgan Securities Inc. as financial adviser to Panamerican Beverages, and is separately advising Morgan Stanley and JPMorgan Chase as lenders to Coca-Cola FEMSA, S.A. de C.V., all in connection with Coca-Cola FEMSA's acquisition of Panamco. Partner Joseph A. Hall and associate Philip J. Pettit advised J.P. Morgan Securities as adviser to Panamco. Partner James A. Florack and associates Anne Kobayashi and Judy A. Melillo advised Morgan Stanley and JPMorgan Chase as lenders to Coca-Cola FEMSA. All members of the Davis Polk team work in the New York office.

Coca-Cola FEMSA/FEMSA's in-house legal team consisted of Carlos Aldrete (General Counsel of both FEMSA and Coca-Cola FEMSA) and David A. González Vessi (International Legal Counsel of FEMSA).

The local law firms representing Coca-Cola FEMSA are: Diego Herrera and Ramón Ricardo Arias from Galindo Arias & López (Panama); Gustavo Reyna, Carlos R. Omana, and Inés Parra from d'Empaire Reyna Bermúdez & Asociados (Venezuela); Jaime Herrera, José Alejandro Torres, Claudia Mateus, and Juan Guillermo Ruiz from Posse Herrera & Ruiz Abogados (Colombia); Antonio Felix de Araujo Cintra, Maria Elisa Gualandi Verri , Ana Paula Galvão, Mihoko Sirley Kimura, Lina Ferreira Santiago and Antenori Trevisan Neto; in antitrust matters Marcelo Procópio Calliari, Rogério Domene and Bruno Lembi Neto, all from Tozzini, Freire, Teixeira e Silva Advogados (Brazil); Partner Eduardo Mayora Dawe and asóciate Ana Lucía Umaña from Mayora y Mayora (Guatemala); Jose Evenor Taboada, Rodrigo Taboada and Samantha Aguilar from Taboada y Asociados (Nicaragua); Harry Zurcher and Mario Pacheco from Zürcher, Montoya & Zürcher (Costa Rica); Manuel Aznar, Luis Octavio Nuñez, Rafael Gómez and Sandra Baranda from Kuri Breña, Sánchez Ugarte, Corcuera y Aznar, S.C. (Mexico) and, in antitrust matters, Ricardo Hernández from Castañeda y Asociados, also from Mexico.

Cravath, Swaine & Moore is advising Panamco while Simpson Thacher & Bartlett represents the controlling stockholders ("Voting Trust") of Panamco. Robert Spatt is the lead partner from STB, who was helped by associate Patrick Naughton. Partners Rodrigo Conesa and Luis Nicolau from Ritch, Heather y Mueller, S.C. acted as transaction counsel, supporting JPMorgan Chase and Morgan Stanley for FEMSA.

In the merger, Coca-Cola FEMSA will pay US$22 per share to Panamco Class A shareholders, and US$38 per share to the Panamco Class B shareholders, who hold 7% of the equity but 100% of the voting power. The Coca-Cola Company, a significant minority shareholder of both Coca-Cola FEMSA and Panamco, will receive unlisted stock of Coca-Cola FEMSA in the transaction. FEMSA, the largest shareholder of Coca-Cola FEMSA, will provide financing for the transaction through a subscription, and JP Morgan and Morgan Stanley have committed to approximately US$2.05 billion in bank financing for the merger.