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DealBook: Anheuser-Busch InBev Revises Grupo Modelo Deal

February 14, 2013 by Leave a Comment

Anheuser-Busch InBev, the maker of Budweiser, is trying to buy control of Grupo Modelo for $20.1 billion.Kirsty Wigglesworth/Associated PressAnheuser-Busch InBev, the maker of Budweiser, is trying to buy control of Grupo Modelo for $20.1 billion.

LONDON – Anheuser-Busch InBev on Thursday revised its $20.1 billion deal for Grupo Modelo, the Mexican maker of Corona beer, in an effort to persuade American antitrust authorities to let the deal proceed.

Under the revised terms, the company offered to sell the rights to Corona and other Grupo Modelo brands in the United States to Constellation Brands, the world’s largest wine company, for $2.9 billion.

A brewery close to the United States-Mexico border currently owned by Grupo Modelo would be sold to Constellation, as well as the perpetual licensing rights to Grupo Modelo’s brands in the United States.

Constellation had agreed to pay $1.85 billion for the 50 percent stake it did not already own in Crown Imports, a joint venture with Grupo Modelo, as part of Anheuser-Busch InBev’s original terms of its proposed takeover of the Mexican brewer.

Anheuser-Busch InBev’s decision to sell Compañía Cervecera de Coahuila, the Mexican brewery that produces Corona, Corona Light and Modelo Especial, is an effort to satisfy regulators after the Justice Department sued last month to block the deal.

United States authorities said the proposed merger would increase Anheuser-Busch InBev’s control of the American beer market and enable it to raise prices. Grupo Modelo is the No. 3 beer company in the United States; Anheuser-Busch InBev is the largest, ahead of MillerCoors.

Anheuser-Busch InBev said the revised deal would give Constellation an independent brewing business, as well as lead Grupo Modelo to divest all of its American operations.

“We believe this revised agreement addresses all of the concerns raised by the U.S. Department of Justice in its lawsuit, leaving no doubt about Constellation’s Crown beer division’s complete independence and ability to compete,” Anheuser-Busch InBev said in a statement on Thursday.

Analysts said the new offer, which caught some off guard, could provide the concessions American regulators were seeking.

“The quick settlement is no doubt surprising, but also shows practicality from the Anheuser-Busch InBev side,” Pablo Zuanic, an analyst at Liberum Capital, wrote in a note to investors on Thursday.

Anheuser-Busch InBev shares rose more than 5 percent in morning trading in Brussels on Thursday.

The company added that its proposed deal for Grupo Modelo was still subject to the Justice Department’s legal challenge, and that the new agreement with Constellation was dependent on the completion of the $20.1 billion acquisition.

The move to block the proposed merger is the first time in more than a decade that American regulators have tried to slow down the consolidation in the global beer industry.

A series of takeovers have left a small number of companies in control of many of the world’s leading beer brands, and have led Anheuser-Busch InBev to become the world’s leading brewing company. The company was created in 2008 through the merger of Anheuser-Busch and the Belgian-Brazilian brewer InBev.

Anheuser-Busch InBev said it had increased its projections for annual cost savings from the Grupo Modelo deal by 66 percent, to $1 billion, from estimates provided when the deal was first announced last year. The terms of the original deal for Grupo Modelo remain unchanged, according to a company statement.

Lazard is advising Anheuser-Busch InBev on the deal, while Morgan Stanley is advising Grupo Modelo.

Article source: http://dealbook.nytimes.com/2013/02/14/anheuser-busch-inbev-revises-deal-for-grupo-modelo/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: Justice Dept. Seeks to Block $20 Billion Merger of Brewers

January 31, 2013 by Leave a Comment

The deal would add Corona to Anheuser-Busch InBev's brands of beer.Carolyn Kaster/Associated PressThe deal would add Corona to Anheuser-Busch InBev’s brands of beer.

4:06 p.m. | Updated

The Justice Department sued on Thursday to block Anheuser-Busch InBev’s proposed $20.1 billion deal to buy control of Grupo Modelo of Mexico, arguing that the merger would significantly reduce competition in the American beer market.

The deal, announced last summer, would add Corona Extra to the company’s formidable stable of brands, including Budweiser and Stella Artois.

But the Justice Department said in its lawsuit, filed in Federal District Court in Washington, that allowing the merger to proceed would reduce competition in the beer industry across the country as a whole and in 26 metropolitan areas in particular. The combined company would control about 46 percent of annual sales in the country, the government said, far outpacing Anheuser-Busch InBev’s closest competitor, MillerCoors.

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“Even small price increases could lead to significant harm,” William J. Baer, head of the Justice Department’s antitrust division, said on a conference call with reporters. “We took this action today because we believe the acquisition is a bad deal for American consumers.”

The deal is the biggest to be opposed by the Justice Department since 2011, when it sued to block ATT’s proposed $39 billion takeover of T-Mobile USA.

The government’s move is the first significant effort to halt widespread consolidation in the beer industry in some time. Anheuser-Busch InBev itself was the product of a blockbuster merger between two of the world’s biggest brewers, and one of MillerCoors’s parents is the acquisitive SABMiller.

In its complaint, the Justice Department said Modelo had served as a low-price counterbalance to its larger competitors, resisting the price increases Anheuser-Busch InBev has promoted regularly.

The government derided the main concession offered by Anheuser, a deal to sell Modelo’s stake in its main United States importer to Constellation Brands, as creating a “facade of competition.” The Justice Department’s complaint highlighted an memorandum that the chief executive of the importer, Crown Imports, sent to his employees soon after the Modelo deal was announced. “Our #1 competitor will now be our supplier,” the executive, Bill Hacket, wrote in the memo.

In a statement, Anheuser-Busch said, “We remain confident in our position, and we intend to vigorously contest the D.O.J.’s action in federal court.”

Article source: http://dealbook.nytimes.com/2013/01/31/justice-dept-seeks-to-block-anheusers-deal-for-modelo/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

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

June 30, 2012 by Leave a Comment

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

Filed Under: Global Business Tagged With: , ,