Advertise with

AB InBev buys out Corona maker Modelo for $20 billion
AB InBev buys out Corona maker Modelo for $20 billion

AB InBev buys out Corona maker Modelo for $20 billion


The Daily Herald /Reuters - Jul 10th 2012, 08:42

Brussels--Anheuser Busch InBev, the world's biggest brewer, is taking over Mexico's Grupo Modelo for $20.1 billion, giving it dominance in Latin America's second-largest economy and adding Corona, the top-selling imported beer in the United States, to its brands. 

The long-awaited deal is the biggest foreign buyout of a Mexican company in more than 20 years and shows how much global brewers are willing to pay for developing market growth in an increasingly consolidated industry.

AB InBev, the owner of Budweiser and Stella Artois beers, said on Friday it had reached an agreement with Modelo's controlling families to buy the half of Modelo it does not already own, increasing its exposure to Mexico's beer market which is growing at about 3 percent a year.

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. AB InBev expects cost savings from the deal of at least $600 million annually after four years, more than most analysts anticipated, plus a further one-time $500 million of cashflow gains.

The new expanded AB InBev would produce about 400 million hectolitres (10.6 billion U.S. gallons) of beer a year, 75 percent more than world number two SABMiller, with estimated revenues of $47 billion and 17 billion-dollar brands, with the addition of Corona Extra, Modelo Especial and Victoria.

The Belgium-based brewer 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 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 United States 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 antitrust concerns. However, the deal includes a call option allowing AB InBev to buy all of Crown every 10 years at a fixed multiple. 

Related News

Distell and AB Inbev square off in booze showdown
13/09/2019 - 10:28
Exclusive branding arrangements with liquor outlets and agreements with sports stadiums took centre stage at Competition Tribunal hearings on Thursday, into Distell's accusation that Anheuser-Busch InBev (AB InBev) is contravening the conditions of its 2016 merger with SABMiller.

Multi-million rand Rustenburg Mall underway
09/09/2019 - 11:07
Rustenburg shoppers can look forward to a brand new shopping centre – Rustenburg Mall – set to introduce its first phase in April 2021.

Introducing the Cape Fine and Rare Wine Auction
23/08/2019 - 10:07
With the world market increasingly focused on the fine and rare wines from South Africa, the Cape Winelands is in a stronger position than ever to showcase its fine wine investments. This year, the Cape Winelands is proud to host its first-ever Cape Fine & Rare Wine Auction, an evolution of the historic Nederburg Auction in 1975.

Boost for SA's economy as China lifts its beef ban
07/08/2019 - 09:10
Within one month of the meeting between President Cyril Ramaphosa and President Xi Jinping at the G20, China has announced that it is lifting the ban on South African beef exports to China. This will be a major boost to South Africa’s economy given that China is the largest consuming market for South African beef and related products.

South Africa’s economy ‘doesn’t have a long time’
02/08/2019 - 12:57
South Africa’s outlook has been dealt several heavy blows following Eskom’s financial results, and the latest unemployment data, which has raised the question: where to from here?