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ABI Pays $20B For Remaining 50% Modelo Stake, As Constellation Makes Deal To Retain U.S. Rights

June 29, 2012

Anheuser-Busch InBev (ABI) has agreed to acquire the 50% stake in Mexico’s Grupo Modelo that it doesn’t already own, in a $20 billion deal that creates a global brewing colossus with annual beer sales of around 400 million cases and nearly $50 billion in yearly revenue. In the U.S., where ABI subsidiary Anheuser-Busch has had a share of around 50% for the past several years, the brewer will now own six of the market’s top 10 beer brands. However, the only one of the six that achieved growth in 2011—Modelo’s Corona Extra—won’t be handled by A-B.

In a transaction related to the ABI-Modelo deal, Constellation Brands has announced that it will purchase Modelo’s 50% stake in Crown Imports, the joint venture the two companies established in 2007 to import and market Modelo’s portfolio in the U.S. Constellation will pay $1.85 billion for Modelo’s share of Crown, which handles longtime import leader Corona Extra; Modelo Especial, the number-three import and an Impact “Hot Brand” for the past 18 consecutive years; and Victoria, which has been one of the hottest beer brands in the U.S. market since its 2010 introduction, as well as Corona Light, Pacifico and Negra Modelo.

Once Constellation’s deal for Crown closes—most likely in the first quarter of calendar 2013—Crown will have perpetual rights to the Modelo range in the U.S. ABI will have the option to buy Crown out every 10 years, but at a relatively pricey multiple of 13 times earnings before interest and taxes—a premium of more than 50% over what Constellation is paying to gain full ownership of Crown. Crown’s pact with Modelo was set to expire in 2017, and it was widely anticipated that Modelo might part ways with Constellation at that time, especially in recent weeks as ABI began making its play for the Mexican brewer. Such a shift would have dealt a huge blow to Constellation, as Crown has been a growth engine for the company.

Earlier today, Constellation announced that its overall net sales and operating income for its fiscal 2013 first quarter (ended May 31, 2012) were flat and down by 5%, respectively. Meanwhile, Crown’s net sales and profits for the three-month period were up by 7% and 3%, respectively.


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