Government blocked Jugos del Valle acquisition

Looks like the competition watchdogs are waking up to the perils of too much market consolidation. In an effort to maintain some sort of – even limited – competition, Mexico’s authorities have said “no” to FEMSA’s acquisition of juice maker Jugos del Valle.

At the end of May, Mexico’s beer and beverage giant FEMSA said that the government’s antitrust authority had blocked its planned acquisition of juice maker Jugos del Valle, which is the number one juice maker in Brazil and number two in Mexico. FEMSA, the world’s second-largest bottler of Coca-Cola drinks, and U.S. Coca-Cola Company had teamed up late last year to buy Jugos del Valle for USD 380 million in cash and the assumption of USD 90 million in debt.

FEMSA and The Coca-Cola Company said they had unofficially been informed of the Federal Competition Commission’s decision to object to the purchase.

They gave no reason for the move. However, once the reasons would be made public, they would announce if they were to appeal.

The block comes as the new Mexican President Felipe Calderon has said he wants more competition in industries where a handful of companies dominate.

Still, there is reason for FEMSA and Coca-Cola to be hopeful. The World Bank in a recent report, for example, studied the outcome of 612 anti-competition resolutions by the competition commission over the past eight years. It found out that large companies in Mexico are more likely to be involved in monopolistic practices and win amparos, or judicial stays, which allow them to delay regulatory rulings against them while they mire the process in appeals.