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Does Sealing the Socofar Deal Position FEMSA for Growth?

FEMSA Comercio S.A. de C.V. ("FEMSA Comercio"), a unit of Fomento Económico Mexicano, S.A.B de C.V. or FEMSA FMX , completed its previously announced acquisition of 60% stake in South America's leading drugstore operator - Grupo Socofar ("Socofar"). This is a significant progress in the company's strategy of expanding in the small-box retail segment.

Founded over six decades ago, Chile-based Socofar has an enterprise value of $998 million and currently operates more than 640 drugstores under the name of Cruz Verde, and 150 beauty stores under the Maicao banner, across Chile. In fact, the company occupies the leading position among all Chilean drugstores and the second one among the country's standalone beauty stores.

Alongside, Socofar oversees Farmasanitas, which operates various in-site pharmacies and dispensary units in Colombia. It has over 150 drugstores in the country.

Coming to FEMSA Comercio, the acquisition not only advances its expansion in the small format retail segment but also widens its exposure in the drugstore business, where the company is looking to grow. The acquisition enables the company to further expand in the South American region through diversified and solid operations under renowned banners. Further, the company will also gain from Socofar's standalone beauty store operations and pharmaceutical distribution to third-party clients, as well as manufacturing of bioequivalent and generic pharmaceuticals.

With this acquisition, FEMSA Comercio has now considerably widened its footprint in the small-format retail chains in Mexico, Chile and Colombia. The banners under which the company operates these retail chains primarily include OXXO stores, Yza, Moderna, Farmacon and Cruz Verde in drugstore operations, and Maicao in beauty stores. Furthermore, the company operates OXXO Gas service stations and Doña Tota quick service restaurants.

Zacks Rank

FEMSA currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Primo Water Corporation PRMW , with a Zacks Rank #1 (Strong Buy) and Cott Corporation COT , carrying a Zacks Rank #2 (Buy). Another favorably ranked stock in the related beverage-alcohol industry is Castle Brands Inc. ROX holding a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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