--Modelo CEO viewed full sale to beer giant as best value
proposition
--AB InBev CEO calls purchase "natural next step" in
relationship
--Room to grow Corona brand sales, accomplish more together
By Amy Guthrie
MEXICO CITY--The chief executive of Mexican brewer Grupo Modelo
SAB (GMODELO.MX) said Friday that his company just couldn't pass on
the opportunity to be fully integrated with the biggest and
strongest beer maker in the world.
By selling to Anheuser-Busch InBev NV (BUD) the 50% of Modelo
that AB InBev didn't already own, in a deal valued at $20.1
billion, Modelo is firmly positioning itself as a "world leader"
amid further beer industry consolidation, Carlos Fernandez told
reporters during a conference call.
AB InBev chief executive Carlos Brito, also on the call,
described the combination as a "natural next step" for the two
companies, saying that together they will be able to accomplish
much more than they would as separate entities.
Corona brewer Modelo partnered with Anheuser-Busch more than 20
years ago. AB InBev absorbed Anheuser-Busch's 50% Modelo stake
through InBev's $52 billion acquisition in 2008 of Budweiser
producer Anheuser-Busch, a deal that created the world's largest
beer maker by sales.
A fully combined AB InBev-Modelo would generate estimated annual
sales of 400 million hectoliters for revenue of $47 billion in
2012, the companies said. The deal will also bring cost savings
worth at least $600 million a year.
Mr. Brito noted that Modelo contributes three billion-dollar
brands: Corona, Modelo Especial and Victoria. AB InBev sees room to
further grow sales of Corona, already the top-selling import brand
in 38 countries, including the U.S., via its global business
platform and expertise.
AB InBev also sees great opportunity in Mexico, where Modelo is
a beer market leader. The country--Latin America's second-biggest
economy--is attractive from a macroeconomic and demographic
perspective, Mr. Brito said, not to mention that it's the world's
fourth most-profitable beer market.
The $9.15/share offer for Modelo represents a 5.7% premium over
the company's closing share price Thursday in Mexico City. In
recent trade on the Mexican Stock Exchange, Modelo shares were up
1% to MXN118.88 ($8.87). Modelo shares have gained around 21% on
the week, though, with both Modelo and AB InBev having confirmed
Monday that they were in talks to expand their relationship.
It's expected that Grupo Modelo shares will delist following AB
InBev's all-cash tender offer for outstanding shares. Mr. Brito
said that AB InBev plans to list its shares on the Mexican Stock
Exchange.
Credit Suisse described the terms of the highly-anticipated
tie-up as "a good deal for minority shareholders in Modelo, who are
receiving full tag-along rights."
Simultaneous to the deal, Grupo Modelo will sell to
Constellation Brands Inc. (STZ) for $1.85 billion its 50% stake in
Crown Imports, the joint venture with Constellation that imports
and markets Modelo beers in the U.S.
Analysts speculated that the Crown sale was an effort to quell
potential antitrust concerns about the merger in the U.S.
Mr. Brito said, rather, that AB InBev had never considered
getting into Crown, and thus decided not to assume that stake.
Crown Imports will continue to manage all aspects of marketing
and pricing for Modelo brands in the U.S.
Write to Amy Guthrie at amy.guthrie@dowjones.com