Big brewer targeting company in Mexico

AB InBev is the Belgium-based maker of Bud Lite. Photo / Thinkstock

Anheuser-Busch InBev, the world's biggest brewer, is close to buying the remainder of Mexico's Grupo Modelo for more than US$12 billion ($15.2 billion), according to a person with knowledge of the matter.

The purchase may be announced as soon as this week, said the person, who asked not to be identified as the discussions are confidential.

The deal isn't completed and may still fall through, the person said.

AB InBev, the Belgium-based maker of Bud Lite, has a non-controlling 50 per cent share of Corona owner Modelo that it inherited after InBev bought US brewer Anheuser-Busch in 2008 for US$52 billion, the biggest brewing deal ever.

Brewers are among consumer-goods companies looking to expand outside Europe as high unemployment and sluggish economies hold back growth.

"Modelo is the next best step AB InBev should make," Gerard Rijk, an analyst at ING Group in Amsterdam, wrote yesterday, saying it allows the company to profit from cost-cutting.

Modelo, Mexico's largest beer brewer, had sought to prevent Anheuser-Busch from selling its stake to InBev as part of the 2008 merger that also gave AB InBev nine of Modelo's 19 board seats.

At the time of the transaction, Modelo chief executive Carlos Fernandez said his company was interested in buying back Anheuser-Busch's non-controlling stake, which the Budweiser-maker bought in the 1990s.

In July 2010, Modelo lost an arbitration bid to deny board seats to some AB InBev directors.

Modelo has expanded in the US and in other countries without using AB InBev's distribution network.

AB InBev's shares fell 0.4 per cent to €55.63 at close of trading in Brussels on June 22.

Modelo's shares closed up 2.9 per cent at 97.95 pesos, giving the company a market capitalisation of 316.9 billion pesos.

Modelo's market value gives it a price-to-earnings ratio of about 28.7, according to data compiled by Bloomberg. That compares with an average of 26.3 for peers in the industry.

Japan's Kirin Holdings' ratio is almost 121, while Heineken NV, which competes with Modelo in Mexico after buying Fomento Economico Mexicano's brewing unit in 2010, trades at almost 28 times earnings, the data shows.

SABMiller, the world's second- biggest brewer by volume, agreed to buy Foster's Group in Australia last year for about A$10.5 billion ($13.3 billion).

- Bloomberg