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AB InBev eyes Mexican Modelo‎ buy out

AB InBev is edging towards a US$15 billion buy out of Grupo Modelo.

The deal would give AB InBev, the world’s largest brewer, access to a growing Mexican market and distribution rights to Corona, the largest US imported beer brand.

The company already owns a 50.4 percent stake in Modelo and is currently in talks to buy the rest from the Modelo controlling families, who have 56% of the shareholder voting power.

AB InBev inherited its stake in Modelo when InBev bought Anheuser-Busch in 2008 for $52 billion, and with a reported free cash flow of $9.1 billion in 2011, the group has scope to finance a possible deal in cash.

Mexico is the world’s sixth biggest beer market and the fourth most profitable with most of the market by heavyweights Modelo and Heineken.

Modelo has over half the market share of the Mexican beer market, but a relatively low profit margin of around 26% which AB InBev would look to push towards the margin of 65% it earns in Brazil.

AB InBev have not commented on a possible deal but it is believed the two sides were in close talks but the sticking point was the size of the premium the Modelo families can extract from AB InBev.

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