AB InBev Seen Gunning for Rest of Modelo

Mexico’s Grupo Modelo is in strategic talks with Anheuser-Busch InBev, to expand its current relationship, it says, leading to speculation that a takeover is in the works. Analysts say a deal for all of Model or for control of it would make sense for AB InBev, which already owns a non-controlling 50% stake in Modelo. “It would be a very logical purchase for AB InBev,” says an equity analyst who covers the company, nothing that the market has long expected it. The value is seen as coming with at least some premium to the 11x-13x Ebita multiples seen in recent Beer mergers, including SABMiller-Fosters and Heineken-Femsa. A valuation of 15x for Modelo would imply a price of roughly $14bn, the analyst notes. Estimating the value is difficult, as it is unclear if the possible deal would include payment to Constellation Brands to buy a stake in a distribution joint venture. “A take-out price would be closer to $15bn, equating to a 30% control premium (in line with historical average brewing sector premiums),” Citi says in a report. The bank calls the potential deal strategically “excellent,” noting tremendous upside in Mexico’s beer market and would be 1% accretive to AB InBev’s earnings in year 1. “These discussions may or may not lead to a consummation of a transaction and any speculation on the terms and conditions is premature,” Grupo Modelo says.