AB InBev agrees to buy Grupo Modelo02 July 2012
Anheuser Busch InBev, the world's biggest brewer, has agreed to pay Grupo Modelo $20.1 billion to take control of the 49.6% of the company it currently does not own.
The fee paid by the Belgium-based Stella Artois and Budweiser brewer is considerably more than the $12 billion figure which was quoted last week but Carlos Brito, AB InBev’s chief executive defended the deal as “pretty reasonable”.
AB InBev said that it will generate cost-savings of at least $600 million annually after four years. The firm will also be boosted by a one-off cash flow gain of $500 million.
The expanded AB InBev operation is expected to produce 400 million hectolitres of beer a year - 75% more than the world’s second largest brewer, SAB Miller. The firm is forecast to generate revenues of $47 billion and will establish a portfolio of 17 billion-dollar brands with the acquisition of Corona Extra, Modelo Especial and Victoria.
Meanwhile, in separate but related deal, Modelo will sell its 50% stake in joint venture Crown Imports to partner Constellation Brands Inc for $1.85 billion. Crown Imports has the right to distribute Modelo beers in the US until the end of 2016.
AB InBev did want to buy Constellation Brands itself but a deal would have pushed its market share upwards of 50% and raise antitrust issues. However, AB InBev will have the right to buy Constellation Brands every 10 years at a fixed multiple.
“The relationship has been there for 20 years. Like any relationship you have good days and bad days,” said Brito.
“But the net of the good and bad was so positive that at some point we decided to look forward as opposed to looking backwards.”
The deal, which is subject to regulatory approval in Mexico and the US, follows AB InBev’s $1.2 billion takeover of the Dominican Republic's Cerveceria Nacional Dominicana brewer in April.
AB InBev took a 50.4% stake in Modelo when InBev bought Anheuser-Busch for $52 billion in 2008.
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