A-B InBev, DOJ Near Agreement Over Modelo Deal
Anheuser-Busch InBev (A-B InBev), Grupo Modelo, S.A.B. de C.V., Constellation Brands, Inc. and Crown Imports LLC have reached an agreement in principle with the U.S. Department of Justice (DOJ) on a proposed resolution to the DOJ’s litigation challenging AB InBev’s proposed acquisition of the remaining stake in Grupo Modelo that it does not already own. The proposed resolution is substantially in line with the revised transaction announced on February 14, 2013.
The DOJ’s civil antitrust lawsuit challenged AB InBev’s proposed acquisition of total ownership and control of Grupo Modelo. The DOJ said that the $20.1 billion transaction would substantially lessen competition in the market for beer in the United States as a whole and in 26 metropolitan areas across the United States, resulting in consumers paying more for beer and having fewer new products from which to choose.
The revised transaction announced in February establishes Crown Imports as the No. 3 producer and marketer of beer in the U.S. through a complete divestiture of Grupo Modelo’s U.S. business. The transaction establishes Crown as a fully owned entity of Constellation, and provides Constellation with independent brewing operations, Modelo’s full profit stream from all U.S. sales, and rights in perpetuity to the Grupo Modelo brands distributed by Crown in the U.S.
As part of AB InBev’s acquisition of the 50 percent of Grupo Modelo it does not already own, AB InBev has agreed to sell Compaa Cervecera de Coahuila, Grupo Modelo’s state-of-the-art brewery in Piedras Negras, Mexico, and grant perpetual brand licenses to Constellation for $2.9 billion, subject to a post-closing adjustment. This price is based on an assumed 2012 EBITDA of
$310 million earned from manufacturing and licensing the Modelo brands for sale by the Crown joint venture, with an implied multiple of approximately 9 times. The sale of the brewery, which is located near the Texas border, would ensure independence of supply for Crown and provides Constellation with complete control of the production of the Modelo brands for marketing and distribution in the U.S.
AB InBev and Constellation have agreed to a three-year transition services agreement to ensure the smooth transition of the operation of the world-class brewery, which is fully self-sufficient, utilizes top-of-the-line technology and was built to be readily expanded to increase production capacity. During this three-year timeframe, Constellation plans to invest approximately $400 million to expand the Piedras Negras facility, which will then enable it to supply 100 percent of Crown’s needs for the U.S. marketplace. Today, Piedras Negras fulfills approximately 60 percent of Crown’s current demand.
In connection with this agreement, the parties and the DOJ have jointly approached the Court and requested an extension of the stay of the proceedings until April 23, 2013. This stay will allow the parties to finalize the details of a proposed consent judgment and the related definitive agreements and papers required for settlement. The parties stated in their filing with the Court that they expect for this to be their final request to extend the stay. Approval of the transaction and the timing of such action remains subject to the finalization of the relevant documentation with the DOJ and other parties, and approval by the Court.
The revised transaction with Constellation remains subject to regulatory approval in Mexico.
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The DOJ’s civil antitrust lawsuit challenged AB InBev’s proposed acquisition of total ownership and control of Grupo Modelo. The DOJ said that the $20.1 billion transaction would substantially lessen competition in the market for beer in the United States as a whole and in 26 metropolitan areas across the United States, resulting in consumers paying more for beer and having fewer new products from which to choose.
The revised transaction announced in February establishes Crown Imports as the No. 3 producer and marketer of beer in the U.S. through a complete divestiture of Grupo Modelo’s U.S. business. The transaction establishes Crown as a fully owned entity of Constellation, and provides Constellation with independent brewing operations, Modelo’s full profit stream from all U.S. sales, and rights in perpetuity to the Grupo Modelo brands distributed by Crown in the U.S.
As part of AB InBev’s acquisition of the 50 percent of Grupo Modelo it does not already own, AB InBev has agreed to sell Compaa Cervecera de Coahuila, Grupo Modelo’s state-of-the-art brewery in Piedras Negras, Mexico, and grant perpetual brand licenses to Constellation for $2.9 billion, subject to a post-closing adjustment. This price is based on an assumed 2012 EBITDA of
$310 million earned from manufacturing and licensing the Modelo brands for sale by the Crown joint venture, with an implied multiple of approximately 9 times. The sale of the brewery, which is located near the Texas border, would ensure independence of supply for Crown and provides Constellation with complete control of the production of the Modelo brands for marketing and distribution in the U.S.
AB InBev and Constellation have agreed to a three-year transition services agreement to ensure the smooth transition of the operation of the world-class brewery, which is fully self-sufficient, utilizes top-of-the-line technology and was built to be readily expanded to increase production capacity. During this three-year timeframe, Constellation plans to invest approximately $400 million to expand the Piedras Negras facility, which will then enable it to supply 100 percent of Crown’s needs for the U.S. marketplace. Today, Piedras Negras fulfills approximately 60 percent of Crown’s current demand.
In connection with this agreement, the parties and the DOJ have jointly approached the Court and requested an extension of the stay of the proceedings until April 23, 2013. This stay will allow the parties to finalize the details of a proposed consent judgment and the related definitive agreements and papers required for settlement. The parties stated in their filing with the Court that they expect for this to be their final request to extend the stay. Approval of the transaction and the timing of such action remains subject to the finalization of the relevant documentation with the DOJ and other parties, and approval by the Court.
The revised transaction with Constellation remains subject to regulatory approval in Mexico.
Related Articles:
Anheuser-Busch InBev Confirms Interest in Grupo Modelo
Anheuser-Busch, InBev Comment on Modelo Arbitration