--Modelo admits to talks with AB InBev
--Says deal to expand relationship may or may not come true
--Modelo shares spike 15.6% upon resumed trade in Mexico
By Amy Guthrie
MEXICO CITY--Corona brewer Grupo Modelo SAB (GPMCY, GMODELO.MX)
said Monday it's aware of speculation about a possible alliance
between Modelo and Anheuser-Busch InBev NV (BUD, ABI.BT), while
admitting that the two parties have engaged in discussions about
expanding their current relationship.
The Wall Street Journal cited people familiar with the matter in
reporting that AB InBev, which already owns a 50% noncontrolling
stake in Modelo, is close to clinching a deal for control of the
Mexican brewer. If it reaches fruition, the deal is estimated to be
worth more than $12 billion and the agreement would end a
contentious history between the two brewers.
Modelo shares shot 9.8% higher on the Mexican Stock Exchange in
early trade, prompting the Mexican Stock Exchange to suspend the
shares just 14 minutes into the session, saying that Modelo must
make a statement regarding possible relevant events before the
shares can be freed for trade again.
Modelo "continuously studies diverse strategic options to create
value for its shareholders," the company said in its subsequent
statement to the Mexican Stock Exchange. "Conversations have taken
place between Modelo and AB InBev in terms of a possible operation
to expand their actual relationship," the brewer added.
The Modelo statements sufficed to convince the Mexican Stock
Exchange to restore trade. Modelo shares commenced trading again at
11:08 a.m. EDT, recently shooting 15.6% higher to 113.25 pesos
($8.12) each.
AB InBev issued similar statements in a press release.
Modelo brands--including top-selling U.S. import Corona
Extra--are imported into the U.S. and marketed through a joint
venture the company has with U.S. wine and spirits maker
Constellation Brands Inc. (STZ, STZB). Modelo had net income of
MXN18.4 billion in 2011, up 18% from the prior year, on sales of
MXN91.2 billion.
A Modelo sale to AB InBev would end a contentious history
between the two companies. AB InBev won its 50% Modelo stake
through InBev's $52 billion acquisition in 2008 of Budweiser maker
Anheuser-Busch, a deal that created the world's largest beer maker
by sales. Anheuser had tried unsuccessfully to entice Modelo to
merge with the U.S. brewing giant after it received the unsolicited
approach from InBev, people familiar with the matter said at the
time.
After InBev sealed the Anheuser-Busch deal, Modelo claimed that
Anheuser-Busch breached a prior agreement between the two companies
by failing to consult the Mexican company on its sale to InBev.
In 2010, an arbitration panel ruled in favor of the merged
company, AB InBev, ending the dispute and, according to analysts at
the time, paving the way for AB InBev to eventually consolidate its
ownership of Modelo.
Modelo noted Monday that it has a "long-standing relationship"
with AB InBev, adding that it "admires the business and brands of
AB InBev."
One question mark around a further Modelo-AB InBev deal is
whether regulators would bless it, given AB InBev's considerable
market power in the U.S. and elsewhere as well as the strength of
Modelo brands such as Corona.
Modelo said Monday that speculation about the outcome of the
discussions with AB InBev is "premature" as the talks may or may
not lead to a deal.
Write to Amy Guthrie at amy.guthrie@dowjones.com
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