Constellation Brands Buys Brewery from Modelo -- Update
October 31 2016 - 10:52AM
Dow Jones News
By Austen Hufford
Constellation Brands Inc. said Monday that it would buy a
Mexican brewery from a subsidiary of Anheuser-Busch InBev NV in
order to meet demand for its growing Mexican beer portfolio.
Constellation is buying the brewery for $600 million, which is
located in Obregon, Mexico, from Grupo Modelo. The brewery is
expected to produce 4 million hectoliters a year with minimal
investment and optimization by Constellation and could eventually
expand to produce 20 million hectoliters.
In 2013, Constellation bought the U.S. distribution rights for
Corona and several other Mexican beers for roughly $5.3 billion
from Anheuser-Busch. AB InBev had to divest the assets to get
Justice Department approval for its $20.1 billion takeover of
Mexico's Grupo Modelo SAB.
In its most recent quarter, Constellation shipped 13% more beer
from the same period a year prior, not counting acquisitions. Much
of its sales now come from Mexican beers like Corona Extra and
Modelo Especial.
The majority of the factory's production is devoted to
satisfying an interim supply agreement Modelo.
In January, Constellation said it would spend $2 billion
constructing a second Mexican brewery. In light of Monday's deal,
Constellation will spend less than previously forecast. Through
2021, it will spend $1.4 billion on the new brewery. It still is
planning to spend $2.5 billion on an expansion to its current
brewery.
"The magnitude of our long-term investments in Mexico largely
remain the same," Chief Finanical Officer David Klein said, noting
the change represents a shift in spending from the brewery to be
built to the one that will be purchased.
The deal is subject to U.S. Department of Justice and Mexican
regulatory approvals and certain closing conditions.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
October 31, 2016 10:37 ET (14:37 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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