Analysis: AB InBev could keep Mexico prize with brewery sale

Fri Feb 1, 2013 11:17am EST
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By Philip Blenkinsop

BRUSSELS (Reuters) - Anheuser-Busch InBev (ABI.BR: Quote) could salvage its plan to take full control of Grupo Modelo GMODELOC.MX by keeping its sights on the lucrative market in Mexico and letting others brew Corona destined for the United States.

AB InBev got half of Mexican brewer Modelo with InBev's 2008 acquisition of Anheuser-Busch. By taking full control it ensures a greater share of a growing market, while developed markets shrink, a global brand in Corona and the chance to cut costs.

After the U.S. Department of Justice's legal challenge to the $20.1 billion deal, the world's largest brewer has three options: a lengthy legal battle, a return to half-ownership of Modelo, or a concession to keep the deal alive.

Despite hardball talk that asset sales would be a deal breaker, the third option appears to be the best, analysts said.

They estimate the dilution to earnings per share would be 2-5 percent with a renegotiated deal or 10 percent if the acquisition fell through.

The Department of Justice (DOJ) has a strong case, according to lawyers.

Corona is exported to the United States by Crown Imports, a 50-50 joint venture of Modelo and Constellation Brands (STZ.N: Quote), which the DOJ says has often resisted sector price increases.

Under AB InBev's deal, Constellation would buy out Crown, but AB InBev would remain its supplier and have the right to buy back the whole of Crown every 10 years.   Continued...

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