The the world's largest brewer, Anheuser-Busch InBev is nearing a deal to buy the 50 per cent it does not already own in Mexican Corona beer maker Grupo Modelo, in a deal that could be valued at more than $12 billion, The Wall Street Journal yesterday reported, citing people familiar with the matter.
While the timing of a deal remains uncertain, it could come as soon as this week, said the paper.
Anheuser-Busch InBev holds a 50 per cent non-controlling stake in Modelo, but has 43.9 per cent of Modelo's voting shares, while the rest is held by the descendants of Modelo's founder and other closely-tied Mexican families in a trust.
Anheuser-Busch InBev inherited the stake through its $52-billion acquisition of US brewer Anheuser-Busch in 2008 by Belgium-based InBev NV. (See: InBev acquires Anheuser-Busch for $52 billion; Budweiser to be flagship brand)
Post acquisition, Mexico City-based Modelo alleged that Anheuser-Busch did not consult it while agreeing to sell itself under their agreement and tried to block the transfer of its shares by filing an arbitration case against Anheuser-Busch. Modelo lost the case and the company's chairman for life, Carlos Fernandez vowed that his family would not sell their controlling stake to Anheuser-Busch.
Founded in 1925, Modelo is the largest beer brewer in Mexico with a 58-per cent market share, and the sixth largest brewer worldwide. It has eight brewing facilities in Mexico, with a total annual installed capacity of 70 million hectoliters.
With flagship brand like the Corona Extra, Modelo has been the top exporter of beer to the US, dethroning Heineken in 1997. Its other brands include Modelo Especial, Corona Light, Negra Modelo, Victoria, Estrella, Leon and Pacífico.
Modelo has a market value of around $23 billion, and posted net income of 18.4 billion pesos ($1.33 billion) in 2011, on revenues of 91.2 billion pesos ($6.58 billion), with sales outside Mexico having grown by 50 per cent over the past five years, accounting for 42 per cent of its 2011 revenues.
Anheuser-Busch InBev is interested in Modelo because of its dominant position in Latin America's second biggest economy and its overseas market share.
After reducing its massive $56.5-billion debt incurred from the Anheuser-Busch acquisition by selling non-core assets, Anheuser-Busch InBev has once again hit the acquisition trail.
In April, Anheuser-Busch, whose flagship brand is the Budweiser beer, acquired a 51-per cent stake in Dominican brewer Cervecería Nacional Dominicana SA (CND) from two sellers for $1.237 billion.
The deal comes after brewing giants try to consolidate in the emerging markets.
Dutch brewer Heineken NV paid around $7 billion in 2010 for Femsa Cerveza, Mexico's second-largest beer maker after Modelo.
In the same month, Canadian-American beer giant, Molson Coors Brewing Company, struck a deal to buy Central and East European brewer StarBev LP, owned by Anheuser-Busch, for €2.65 billion ($3.54 billion), in order to strengthen its foothold in Europe's emerging markets (See: Molson Coors to acquire European brewer StarBev for $3.54 bn).
SABMiller Plc, the world's second-biggest brewer, acquired Australia's Foster's Group last year for about $10.2 billion. (See: Foster's finally accepts SABMiller's $10.2-bn takeover offer)