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AB InBev 'nears deal to buy out Modelo'

by Renee Cordes in Brussels | Published June 25, 2012 at 9:17 AM

Shares in Anheuser-Busch InBev AB rose Monday, June 25, on reports that the world's top brewer is nearing a deal potentially worth more than $12 billion to buy the 50% it does not yet own in Mexico's Grupo Modelo SAB de CV.

An agreement with Modelo would end years of acrimony between the companies, and give the Leuven, Belgium-based maker of Budweiser, Stella Artois and Beck's beers control over Corona, the best-selling imported beer in the United States.

InBev spokeswoman Karen Couck declined to comment on reports of a pending deal, which first appeared in The Wall Street Journal. Citing people familiar with the matter, the paper said that while the timing is uncertain, an announcement could come as early as this week.

Shares ABInBev gained 1.5% to trade at €56.44 late Monday morning on the Euronext stock exchange, yielding a total market value of just below €90.7 billion ($113.2 billion). Grupo Modelo shares closed Friday at 97.95 pesos, up 2.9% over Thursday, for a market value of 316.9 billion pesos ($22.8 billion).

If it goes ahead, the deal would be the biggest in the brewing industry since SABMiller plc last year gulped down Australia's Foster's Group Ltd. for A$10.5 billion ($10.53 billion).

AB InBev gained its stake in Modelo when Belgium's InBev bought Anheuser-Busch Cos. of St. Louis, Mo., in 2008 for $52 billion in the world's biggest brewing merger to date to form AB InBev.

In a research note, analyst Marc Leemans of Bank Degroof in Brussels said that a deal between AB InBev and Modelo "would mean the biggest step forward since the Anheuser-Busch transaction in 2008, creating new growth opportunities and making one of the best and strongest consumer-goods companies even stronger." The analyst has an accumulate rating on AB InBev shares, with a price target of €55.

At the time of the 2008 merger to create AB InBev, Modelo CEO Carlos Fernandez said that his company was interested in buying back Anheuser-Busch's stake, which the maker of Budweiser acquired in the 1990s.

The relationship between AB InBev and Modelo has never been a harmonious one.

In July 2012, Modelo, which is based in Mexico City, lost an arbitration bid to deny board seats to some AB InBev directors.

The panel ruled that AB InBev had not violated a 1993 investment agreement between Anheuser-Busch and Modelo when it transferred the Modelo stake to the merged entity. The panel awarded no damages to the Mexican company, which had filed a claim for $2.5 billion, having originally sought to halt the stake transfer.

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