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Modelo, Molson Coors Aim To Acquire Fosters, But ABI Could Stand In The Way

June 13, 2011

Mexico’s Grupo Modelo is holding a meeting today in Mexico City to discuss the possibility of joining forces with Molson Coors to bid for Foster’s Ltd., according to Bloomberg News. In order to make such a move, Modelo would need approval from ABI, which owns a 50% non-controlling stake in the Mexican brewer and has nine of Modelo’s 19 corporate board seats.

Most analysts believe ABI will reject Modelo’s plans to acquire Foster’s, partly because the move would increase Modelo’s size and possibly dilute ABI’s share in the Mexican brewer. Foster’s has relatively strong profit margins and is the Australian beer market’s leading player, but it’s effectively a one-market company because it sold the rights to the Foster’s brand in most markets outside Australia years ago. The Australian beer market isn’t particularly large or dynamic. Ranking just below the top 20 beer markets worldwide, it accounts for around 1% of global beer consumption. Most of the recent excitement in the Australian market has come at the expense of the mainstream segment where Foster’s is strongest. Premium player Coopers—Australia’s third-biggest brewer behind Foster’s and Lion Nathan—has consistently gained ground in recent years.

If ABI views Foster’s as an attractive asset, then it would be well-positioned to acquire the brewer on its own—something both Modelo and Molson Coors would be hard-pressed to do independent of one another. Foster’s has a market value of around A$9 billion ($9.5b).

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