(Updates with comment from U.S. Department of Justice.)
By Simon Zekaria
LONDON--Anheuser-Busch InBev NV (BUD, ABI.BT) agreed to give up
key U.S. assets and beer licenses of Grupo Modelo SAB (GPMCY,
GMODELO.MX) worth $4.75 billion to fend off U.S. antitrust
regulators and push through its $20.1 billion takeover of the
Mexican brewer.
AB InBev, the world's biggest beer maker by revenue, will grant
perpetual rights for the popular Corona and Modelo lager brands in
the U.S., as well as sell its Piedras Negras bottling factory in
Mexico, to U.S.-based Constellation Brands Inc. (STZ, STZB), the
No. 1 wine group, for a total of $2.9 billion.
AB InBev will also sell Modelo's 50% stake in Crown Imports, a
U.S. beer importer and distributor, to its joint-venture partner
Constellation for $1.85 billion, the companies said.
Leuven, Belgium-based AB InBev already owns 50% of Modelo, but
at the end of last month the U.S. government filed a lawsuit
seeking to block a full takeover. Regulators are concerned the deal
would restrict competition and push up prices for beer drinkers,
amid growing big-brewer dominance in the mainstream lager
market.
"I can't comment on a specific proposal. However, we would give
any proposal serious consideration and at the same time we would
continue to prepare for litigation," said Gina Talamona, a
spokeswoman for the U.S. Department of Justice in Washington,
D.C.
Under the original terms of the deal, AB InBev had an option to
buy the U.S. rights for all Modelo brands after 10 years. AB InBev
had previously said it would sell Modelo's half stake in Crown to
Constellation, but regulators said the arrangement wasn't
satisfactory because Constellation would still rely on AB InBev for
its beer supply.
On Thursday, AB InBev said the brewery sale--located near the
Texas border to supply of the U.S. beer market--would ensure
independence of supply for Crown, and gives Constellation "complete
control" of the production and distribution of Modelo brands.
Constellation, which also sells liquor, will invest about $400
million over three years to expand the brewery's capacity, which
currently accounts for 60% of Crown's demand.
The U.S. beer marker, at around 250 million hectoliters, is
second only to China as the world's largest by volume. It is
largely dominated by AB InBev, owner of Bud Light and Budweiser,
and MillerCoors, maker of the Coors Light brand, which together
accounted for more than 80% of U.S. beer profits in 2011, according
to Bernstein Securities data. While Corona is the best-selling
imported beer in the U.S., Modelo has a much smaller presence with
around a mid-single-digit percentage share of sales. Together, AB
InBev and Modelo would control just under half of U.S. beer
sales.
Analysts welcomed Thursday's agreement between AB InBev and
Constellation, but remained cautious on whether the brokered deal
will appease the U.S. Department of Justice.
"The fact that Crown now would become a stronger independent
competitor...could be a game changer," said Bank Degroof's Hans
D'Haese. Crown would become the No. 3 producer and marketer of beer
in the U.S. under the revised offer, AB InBev said.
"[It] is a move in the right direction. But will it be
sufficient?" Mr. D'Haese said.
Liberum capital analyst Pablo Zuanic noted the speed of the
revised deal would please industry watchers. "The quick settlement
is no doubt surprising, but also shows practicality from the AB
InBev side."
AB InBev made a play for the half of Modelo it didn't own in
June last year, in a bid both to bolster its position across
Mexico's fast-growing beer market and to add Corona, a pale lager
usually drunk with a wedge of lemon or lime, to its stable of
top-selling brands.
The company is benefiting from strong demand for premium beer in
Latin America and Asia, where increasing adult populations and
rising incomes are driving consumption. But despite the recent
modest recovery seen in the U.S. beer market, the company's high
exposure to a country where consumers have been cutting spending on
lager means it has looked elsewhere to diversify its risk across
global beer markets.
Just two months before its proposal for Modelo, the maker of
Brazilian lager Brahma forked out $1.24 billion for a majority
stake in Dominican brewer Cerveceria Nacional Dominicana
(CCN.GU).
Write to Simon Zekaria at simon.zekaria@dowjones.com
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