Anheuser-Busch InBev's Shares Hit By Modelo Concerns
News: Belgium-based Anheuser-Busch InBev's shares declined 1.1% following reports that the US Justice Department might block the firm's planned takeover of Mexican brewer Grupo Modelo, reports Bloomberg. Anheuser-Busch InBev, which already owns a 50.2% stake in Grupo Modelo, entered an agreement in June 2012 to buy the remaining stake of the Mexican group for US$20.1bn. Anheuser-Busch InBev's shares fell 0.68% on October 10 from US$86.89 per share to US$86.72 per share.
BMI View: Anheuser-Busch InBev (ABI) has confirmed that it is to acquire the 50% stake in Mexican brewer Grupo Modelo that it does not already own in a deal worth US$20.1bn. As part of the deal, Modelo will sell its 50% stake in its current US distributor, Crown Imports, to Constellation Brands for US$1.85bn, which will become solely responsible for the distribution of Modelo's brands in the US. This move is designed to avoid competition concerns, with ABI otherwise gaining control of 50% of the distribution of beer in the US. However, in our view it also lessens the potential gains from the deal, with ABI unable to give a boost to brands such as Corona through its own network. What it clearly implies is that ABI's key interest is in the domestic Mexican market, where it is likely to see potential for dramatic growth through increased volumes and premiumisation.