AB InBev buys out Corona maker Modelo for $20 billion

Fri Jun 29, 2012 7:12am EDT
 
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By Philip Blenkinsop

BRUSSELS (Reuters) - Anheuser-Busch InBev, the world's biggest brewer, will swallow the half of Grupo Modelo it does not already own for $20.1 billion in the latest in a string of deals by big brewers looking for growth in emerging markets.

The owner of Budweiser and Stella Artois beers said on Friday that it had reached agreement with Modelo's controlling families for it to secure a leading position in a growing domestic beer market and capture the best-selling Mexican beer Corona Extra.

Modelo, founded in 1925, is Mexico's biggest brewer with a 50 percent-plus market share in a virtual duopoly with Heineken's FEMSA Cerveza in the world's fourth-most-profitable beer market. Corona is the biggest imported beer in the lucrative United States market.

AB InBev is attracted to Modelo by a Mexican beer market that is growing at about 3 percent and cost savings that the company said would be at least $600 million a year.

AB InBev said it had added $14 billion of new bank loans to fund the all-cash transaction, adding that it would reduce its net debt/core profit (EBITDA) ratio to 2.0 times during 2014.

Some analysts believe AB InBev could then line up world number two SABMiller as its next acquisition target. Others say that the drinks operations of PepsiCo would make more sense.

In a related but separate transaction, Modelo will sell its 50 percent stake in joint venture Crown Imports to partner Constellation Brands Inc for $1.85 billion. Crown Imports distributes Modelo beers in the U.S. in a deal that runs to the end of 2016.

If AB InBev had wanted to buy out Constellation and distribute the beer itself, it would have pushed its market share in the United States above 50 percent, leading to anti-trust concerns.   Continued...

 
The logo of Anheuser-Busch InBev is seen on the facade of its headquarters in Leuven June 25, 2012. REUTERS/Francois Lenoir