Focus - Anheuser-Busch InBev has time for Modelo
Carlos Brito in no hurry to acquire Grupo Modelo
Anheuser-Busch InBev said this week that an arbitration panel has affirmed its right to a 50% non-controlling stake in Modelo.
The dispute, which relates to the transfer of rights following InBev's acquisition of Anheuser-Busch in late 2008, has previously prompted analysts to speculate that the new A-B InBev behemoth would seek to wrestle a controlling stake in Modelo.
However, many believe that this week's ruling shows that the Budweiser brewer is prepared to play a waiting game for Mexico's largest brewer.
Trevor Stirling, analyst with Sanford C Bernstein, said of the arbitration ruling this week: "We believe that this indicates that a potential deal for A-B InBev to buy full control of Modelo looks unlikely in the near-term."
Others believe that A-B InBev has time on its side.
"A-B InBev can now decide on the phasing in of the future steps in closing a deal on Modelo and in the meantime it can strengthen its balance sheet, solve potential anti-monopoly issues and focus on the US top-line recovery," said Gerard Rijk, of ING, today (14 July).
US beer sales remain under pressure following a sharp rise in unemployment in the country over the last two years.
A-B InBev is the US beer market leader, with a 49% volume share, but its core Budweiser brand has been losing ground for several years. This is something that company CEO Carlos Brito indicated recently that the firm intends to address.
Modelo exports its Corona beer to the US via a joint venture with Constellation Brands, named Crown Imports. The two firms are contracted to work together until 2016 and it is thought that A-B InBev might provoke the ire of US anti-trust officials if it attempts to take over importation of Modelo's beers by taking control of the Mexican brewer.
Such a deal would likely give A-B InBev a 54-55% volume share of US beer volumes, something that the Department of Justice might take exception to.
At the same time, playing a waiting game on Modelo could save A-B InBev money in the longer term.
"Modelo’s relative positioning in Mexico might come under pressure as Heineken will gain value market share due to innovations," said Rijk.
"As Heineken will be able to take value share, the Modelo family might be pressed to ask for A-B InBev support (which might lower A-B InBev’s acquisition sum)," he added.
For now, we can expect A-B InBev to play a waiting game.
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