If ifs and ands were pots and pans there’d be no work for tinkers
According to Carlos Laboy and John Gilmore, two analysts with Credit Suisse, AB-InBev should buy Grupo Modelo because the largest Mexican brewer’s USD 1.5 billion in cash would accelerate AB-InBev paying down its debt and improve its debt coverage ratios. This is what the two bankers reportedly told beer distributors, brewers and importers at a beer industry meeting in Austin, Texas, last month.
Corona’s global brand reach would also round out AB-InBev’s Budweiser and Stella Artois brands, accelerate the turnaround of Anheuser-Busch in the United States, help push Budweiser in Mexico and help Anheuser-Busch’s “top line growth problem in the U.S.” with Corona Light and Corona Extra, the two analysts said.
Well, if all had gone according to plan, Anheuser-Busch would have long owned Grupo Modelo. It is just that the Mexicans, to date, have thwarted all attempts to buy them out.
AB-InBev has a non-controlling 50 percent stake in Grupo Modelo, which it obtained through Belgian brewer InBev’s takeover of U.S.-based Anheuser-Busch last year. The other 50 percent of Grupo Modelo is in the hands of a voting trust run by a group of closely connected Mexican families. Under Grupo Modelo’s 50-50 partnership with Anheuser-Busch, local investors maintained management control.
Grupo Modelo, maker of number one U.S. import beer Corona, is currently in arbitration, saying the tie-up between InBev and Anheuser-Busch violates provisions of the investment agreement between the Mexican company and Anheuser-Busch.
Nonetheless, the uncertainty as to the outcome of the arbitration proceedings has not stopped analysts from issuing “buy” recommendations for Grupo Modelo’s stock.
During 2008, Grupo Modelo’s total beer volume increased 1.5 percent year-on-year, reaching 52.3 million hl. In Mexico, despite a slowdown in consumption that was more marked during the second half of the year, volumes rose 1.9 percent.
Exports, which used to be the growth engine of Grupo Modelo, slowed down during 2008. International beer sales increased 0.6 percent only to reach 16.0 million hl. In the past, about 90 percent of Grupo Modelo’s exports went to the U.S.
Amid fears of weaker beer volume growth both in Mexico and the U.S., Grupo Modelo announced at the end of March that it was slashing 1,200 jobs in Mexico. The brewer began firing staff at its plant in Mexico City on 30 March 2009.
