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Beverage NewsBeer

AB InBev acquires Grupo Modelo, Constellation acquires Crown Imports

June 29, 2012

Anheuser-Busch InBev (AB InBev), Leuven, Belgium, will acquire the remaining stake in Grupo Modelo, Mexico City, for $20.1 billion. The combined company would lead the global beer industry with roughly 400 million hectoliters of beer volume annually and 2012 estimated revenues of $47 billion, AB InBev noted in a statement. Tangentially, Constellation Brands Inc., Victor, N.Y., which in a joint venture with Grupo Modelo currently owns 50 percent of Crown Imports LLC, Chicago, signed an agreement with AB InBev to purchase the remaining 50 percent interest in Crown for $1.85 billion.

Constellation Brands will have 100 percent ownership and control of Crown Imports, which will continue to independently import, market and distribute Grupo Modelo’s brands in the United States. AB InBev will ensure the continuity of supply, quality of products and ability to introduce innovations, it said. Crown Imports will continue to manage all aspects of the business, including marketing, distribution and pricing decisions.

AB InBev’s acquisition of Grupo Modelo is a natural next step given AB InBev’s existing economic stake of more than 50 percent in Grupo Modelo and the successful long-term partnership between the two companies, the company said. The combined operations would span 24 countries with enhanced opportunities for its 150,000 employees around the world.

“Grupo Modelo has been one of our most important partners for more than 20 years and we are very pleased to evolve our long and successful relationship into this combination,” said Carlos Brito, chief executive officer of AB InBev, in a statement. “There is tremendous opportunity from combining two leading brand portfolios and further expanding Grupo Modelo’s brands worldwide through AB InBev’s extensive global distribution network. Our admiration for Grupo Modelo’s business and brands has only increased with time and we look forward to joining our historic and world-class breweries.”

Grupo Modelo’s Corona will become a global flagship brand alongside Budweiser, Stella Artois and Beck’s. AB InBev noted the opportunities to grow Corona outside the United States and Mexico through the company’s worldwide distribution network. Consumers in Mexico will gain more access to AB InBev’s portfolio. Beer is the largest alcohol beverage subcategory in the country with 70 percent of value share, according to AB InBev’s statement. The company sees Mexico as an attractive market in which to invest with solid macroeconomic fundamentals and a favorable demographic profile, the company said.

The company also expects the combination to yield synergies of at least $600 million. Forecasted synergies include the expansion of Corona, economies of scale through combined purchasing opportunities and sharing of best practices around the world. Together, the combined company also will continue to work to mutually enhance their corporate responsibility initiatives for their employees, environment and consumers. AB InBev looks to learn from the state-of-the-art technology used in Grupo Modelo’s newest breweries, which it said are among the most modern and efficient worldwide.

Grupo Modelo’s name, identity, heritage and headquarters in Mexico City will be maintained and the company will continue to have a local board. Two Grupo Modelo board members will join AB InBev’s board of directors and have committed, upon tender of their shares, to invest $1.5 billion of their proceeds from the tender offer into shares of AB InBev to be delivered within five years via a deferred share instrument, the company said.

The transaction is subject to regulatory approvals in the United States, Mexico and other countries, the approval of Grupo Modelo shareholders in a general meeting, and other customary closing conditions. It is expected to close during the first quarter of 2013.

Constellation Brands’ purchase of Crown Imports also is subject to regulatory approval and is expected to close during the first quarter of a 2013.

“This is a significant milestone in the history of Constellation Brands,” said Rob Sands, president and chief executive officer of Constellation Brands, in a statement. “We have been the importer, marketer and seller of Grupo Modelo brands in the U.S. for almost two decades. During this time, the Crown Imports team has successfully built the Grupo Modelo portfolio into an enviable position of leadership and growth. Our full ownership of this significant beer business provides an additional strategic lever for driving overall profitable organic growth. We expect this transaction to dramatically enhance the financial profile of our company and it will solidify Constellation Brands’ position as the largest multi-category supplier of beverage alcohol and the third largest total beverage alcohol company in the U.S.”

Sands noted Crown Imports’ marketplace momentum and growth through new products as well as innovation in advertising, marketing, promotions and packaging.

“This agreement provides certainty and continuity for Crown Imports and its wholesaler partners,” said Bill Hackett, president of Crown Imports, in a statement. “We look forward to continuing to work with our wholesaler network to further grow the Grupo Modelo portfolio of brands across the U.S. marketplace.”

KEYWORDS: Anheuser-Busch Constellation Brands Corona Crown Imports Grupo Modelo

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