Canadian Manufacturing

InBev buys rest of Corona maker Modelo for $20 billion

The companies will save $600 million annually by combining operations

BRUSSELS, Belgium—Anheuser-Busch InBev SA agreed Friday to buy the half of Corona maker Grupo Modelo it doesn’t already own for $20.1 billion in cash, in a deal that will greatly increase the size and dominance of the world’s largest brewer.

InBev will pay $9.15 per share for the company, a 30 per cent premium to the Mexican company’s share price just before rumours of the deal emerged June 22.

The deal adds Corona, Modelo and Pacifico brands to InBev’s Budweiser, Beck’s and Stella Artois, among others. The combined company would have annual sales of $47 billion, and employ 150,000 workers in 24 countries.

Analysts said InBev appears to have paid highly for Modelo, but the deal makes strategic sense.

“This is likely to lead to higher margins for Modelo,” said SNS Securities analyst Richard Withagen in a note. He said InBev will move rapidly to introduce more of its brands into the Mexican market. “As a result, competition in the Mexican market is likely to remain fierce.”

Modelo holds about 56 per cent of the Mexican beer market, while rival Dutch brewer Heineken NV controls around 41 per cent, with brands such as Dos Equis and Tecate .

InBev said it expects the companies will save $600 million annually by combining operations. Regulators around the world, but most importantly in Mexico and the U.S. must approve the deal. InBev said it expects the deal to close during the first quarter of 2013.

In a related deal, Modelo agreed to sell its 50 per cent stake in distributor Crown Imports LLC to its partner, winemaker Constellation Brands Inc. of New York, for $1.85 billion.

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