Comment - Anheuser-Busch InBev and Grupo Modelo - a "combination" or a "merger"?
A-B InBev's CEO Carlos Brito prefers to call it a "combination" with Grupo Modelo
The Belgium-headquarted firm has agreed to pay US$20.1bn for the 50% or so stake it does not already own in the Corona brewer. Modelo CEO Carlos Fernandez has referred to it as a "merger". While Carlos Brito, A-B InBev's top man, prefers to call it a "combination".
Whatever you label it, for a long time this deal looked like it wouldn't happen. Back in 2008, Fernandez actually quit the board of Anheuser-Busch just prior to A-B being acquired by InBev. Other episodes in the intervening years have suggested Modelo were not about to cosy-up to their uncomfortable bedfellows anytime soon.
But all this apparent unfriendliness appears to have been forgotten in the name of business. "It is time to cement our relationship," as Fernandez put it today (29 June).
And who can blame him? Ultimately, on the evidence, it's a win for both sides. As a proud family firm (Fernandez is the great-nephew of one of the firm's founders) Modelo will get to keep its name and Mexico City headquarters, under the terms of the deal.
Modelo will also get to maintain its "identity and heritage", the press release claims. And two, as yet unamed, Modelo board members will join A-B InBev's board.
But what about the beer?
Modelo's Corona brand is set for a huge boost. Corona is already exported to about 180 countries. But A-B InBev has promised the light lager will become a "global flagship brand" alongside Budweiser, Stella Artois and Beck's. A-B InBev talks of "meaningful opportunites" to grow Corona outside the US and Mexico. There's also the small matter of 12 other brands it brews and distributes, including Pacifico and Negra Modelo.
From A-B InBev's perspective, it gets a stronger foothold in Mexico, Latin America's second-largest economy, where beer sales totalled about US$22bn last year. Modelo has imported and distributed Budweiser and Bud Light in Mexico for the past 20 years, but this new deal will no doubt mean this penetration will be increased, and a greater focus put on sales of other A-B InBev brands.
It appears, however, Modelo's Fernandez is happy with this situation, saying "this will bring our brands and proud heritage to even more consumers internationally, while offering an increasing number of A-B InBev's brands in Mexico".
As with any "merger" or "combination" situation, staff at both companies involved will be wondering how they will be affected. So far, the soundings are good, with A-B Inbev talking of "enhanced opportunites" for employees, while Grupo Modelo staff will "benefit from global career-developement opportunities", the companies said.
Meanwhile, the only real loser here appears to be SABMiller. Its shares fell in London on news of today's deal, as it would suggest the long talked-of merger between SABMiller and A-B InBev could now be off the table for some years.
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