A-B in Merger Talks With Mexico's Modelo

Brewer Looking to Head off InBev Bid

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CHICAGO (AdAge.com) -- Anheuser-Busch, trying to fend off an unsolicited takeover bid from Belgian-Brazilian InBev, has reportedly entered merger talks with Mexico's Grupo Modelo.

A-B already owns a 50% nonvoting equity stake in Modelo, Mexico's largest brewer, which brews Corona Extra, Negra Modelo, Pacifico and other brands. The No. 1 U.S. brewer's interest in a deal is believed to be driven by a desire to make itself too expensive for InBev to buy.

Neither A-B nor Modelo could be reached for comment.

Obstacles
At its current share price, Modelo has a total market capitalization of about $16 billion, making the half A-B doesn't own worth $8 billion. Any successful offer would likely have to come at a premium to the current trading price, of course.

There could be multiple obstacles to a deal, which was first reported by The Wall Street Journal's website. In the U.S., for instance, Modelo brands are distributed by Crown Imports, a joint venture between Modelo and Constellation Brands. Constellation's CEO recently said A-B would likely face antitrust hurdles here if it tried to move Corona and the other Modelo brands into its wholesaler system. It's also unknown whether Modelo is interested in selling.

The bid
InBev yesterday made public a $65 per share offer for A-B that valued the Budweiser brewer at $46.4 billion.

In a statement, the brewer said: "As part of its proposal, InBev envisions making St. Louis, Mo., the headquarters for the North American region and the global home of the flagship Budweiser brand. In addition, InBev has proposed to name the combined company to evoke Anheuser-Busch's heritage, reflecting the strong history of Anheuser-Busch's key brands. Given the limited geographical overlap between the two businesses and the efficiency of Anheuser-Busch's brewery footprint in the United States, InBev would maintain all of Anheuser-Busch's U.S. breweries."
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