The Largest Brewery Gets Bigger – Anheuser Busch InBev Acquires Grupo Modelo for $20.1 Billion
Earlier this week we wrote an article titled Beer Wars Escalate – Anheuser Busch InBev Seeks Modelo Acquisition about a possible Anheuser Busch InBev buyout of Grupo Modelo. Today, the deal came to fruition, as AB InBev announced a $20.1 billion all-cash purchase of the Mexican mega-brewery. The acquisition gives AB InBev, already the world’s largest brewing company, an even bigger hold on the world market and the rights to internationally renowned brands like Corona, Modelo Especial, and Victoria.
However, the buyout, which is the second largest in the market’s history behind InBev’s $52 billion purchase of Anheuser Busch in 2008, came at a high price. AB InBev agreed to pay $9.15 a share for the remaining half of Grupo that it didn’t already own –a 30% premium on the company’s close on June 22. Furthermore, this all cash purchase required $14 billion of new bank loans.
While the takeover was costly, most experts say Modelo is well worth the price. Societe Generale analyst, Andrew Holland, explains, “Modelo is the market leader…and Modelo has the leading import brand into the United States…It was always going to be high, given that Modelo shareholders are under no compulsion to sell. But InBev has a strong track record in integration and cost savings." The new-look AB InBev will operate in 24 countries, employ 150,000 individuals, and produce over 400 million hectoliters of beer a year (75% more than second place SABMiller). On Friday, AB InBev estimated that this increased output will result in annual revenues of $47 billion.
The buyout will also mark AB InBev’s entry into Mexico, the world’s fourth largest beer market, and will add Corona, Modelo Especial, and Victoria to its stable of world-renowned beers, which already includes Budweiser, Beck’s, and Stella Artois. Marc Leemans, an analyst at Bank of Degoof in Brussels, said, “The combination of both breweries creates a pan-American powerhouse with No. 1 or 2 positions in every major market from Canada to Argentina.” The merger will also result in greater international distribution of Modelo brands. Grupo Modelo CEO, Carlos Fernandez, said, “Together we will be the leading global brewer with top brands around the world and positions in some of the fastest growing countries. This is an exciting transaction that will bring our brands and proud heritage to even more consumers internationally while offering an increasing number of AB InBev's brands in Mexico.”
This takeover represents one of many over the past few years, and we expect more to come in the near future. Many analysts believe the next major AB InBev acquisition could be SABMiller, or PepsiCo –both of which would be more costly than the Modelo purchase. Regardless of what company is next in line to be swallowed up by one of the world’s brew giants, it is apparent that big beer is getting bigger, and this trend doesn’t seem like it’s going to change anytime soon.
Your Choice. Your Beer. Drink Up.