DealBook: Anheuser-Busch InBev Buys Rest of Grupo Modelo, Maker of Corona Beer

11:40 p.m. | Updated

Anheuser-Busch InBev agreed on Friday to buy the share of Grupo Modelo that it did not already own for $20.1 billion, concluding a multiyear effort to take full control of the maker of Corona Extra beer.

The deal will solidify Anheuser-Busch InBev’s position as the world’s biggest brewer and as one of the industry’s most tenacious consolidators. The deal, the second-biggest in the company’s history, will add Corona to a stable of brands that already includes Budweiser and Stella Artois.

The deal is one of the biggest announced transactions in recent months. Merger activity has largely slowed, as the confidence of corporate executives and boards has been shaken by the European fiscal crisis and the uncertain domestic economy.

If approved by shareholders, the deal will finally unite the two companies. They have shared a bond since 1993, when Anheuser Busch first took a stake in Modelo. It eventually built up a 50 percent economic stake in the Mexican brewer.

The combined company would have $47 billion in annual revenue, with operations in 24 countries and 150,000 employees. The merger is expected to generate about $600 million in annual cost savings. And it would give Anheuser-Busch InBev access to Mexico’s fast-expanding domestic market.

“This transaction is a natural next step in the relationship,” Carlos Brito, Anheuser-Busch InBev’s chief executive, said in a telephone interview on Friday.

Those ties have frayed at times. When InBev purchased Anheuser Busch in 2008, Modelo argued that the deal broke contractual agreements that it had with the American beer maker. An arbitration panel ruled in Anheuser-Busch InBev’s favor in 2010, eventually setting the stage for Friday’s merger announcement.

Under the terms of the deal, Anheuser-Busch InBev will pay $9.15 a share, a 30 percent premium to the company’s closing price on June 22, before the deal was reported.

The transaction will involve a number of steps. Modelo will absorb several subsidiaries, including Dirección de Fábricas, a local glass bottle manufacturer largely dedicated to the company, to help streamline its corporate structure.

To help secure the support of Modelo’s controlling families, Anheuser-Busch InBev agreed to a number of steps that would preserve the Mexican brewer’s identity. Modelo will continue to be based in Mexico City and will have a local board, while two of the company’s directors will join its new parent’s board.

Perhaps the most notable step is the sale of Modelo’s 50 percent stake in Crown Imports, a joint venture with Constellation Brands that imports Corona into the United States. Constellation will buy the stake for $1.85 billion, in an effort to satisfy antitrust concerns.

While some analysts have raised questions about tough antitrust scrutiny, Mr. Brito argued that the Crown deal should soothe such fears. He pointed to examples of competitors sharing ties in creating certain products, like Pabst Blue Ribbon beer being brewed and distributed by MillerCoors.

“This kind of relationship is common in this industry,” he said.

Anheuser expects to pay for the takeover through cash on hand and $14 billion in bank loans.

The deal is expected to close by the first quarter of next year.

Article source: http://dealbook.nytimes.com/2012/06/29/the-beer-wars-heat-up-with-modelo-deal/?partner=rss&emc=rss