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Global Credit Research - 31 Jan 2013
New York, January 31, 2013 -- Moody's Investors Service said today that the Department of Justice
("DOJ") antitrust lawsuit challenging Anheuser-Busch
Inbev's ("ABI") proposed acquisition of Grupo Modelo
is a credit negative for ABI but does not impact its A3/ P-2 rating
or positive outlook.
The Justice Department's today filed a civil lawsuit in the U.S.
District Court for the District of Columbia alleging that ABI's
proposed acquisition would substantially lessen competition in the US
beer market. ABI issued a statement soon afterward saying that
it would vigorously contest the lawsuit which it believes to be inconsistent
with the law. Should the lawsuit cause the deal to unwind,
Moody's would view the development to be a strategic negative for
ABI in the long run, though a financial positive in the short run
due to lower leverage.
On June 29 2012, ABI announced its plan to acquire the remaining
stake in Grupo Modelo that it did not already own in a $20.1
billion transaction. Today's lawsuit seeks to prevent the
companies from merging and preserve the existing competitive landscape
where Modelo is an important competitor to ABI, which is already
the largest player in the highly concentrated US beer market. As
a result of today's developments, the company no longer expects
the deal to close during the first quarter of 2013 and the timing and
eventual outcome of the transaction are likely to remain uncertain for
The full ownership of Modelo, which is now being challenged by DOJ,
would have strengthened ABI's ability to consolidate and control
the international cash flows from this very attractive and growing business
and further solidify ABI's position as the global beer industry
leader with over $47 billion in pro-forma total revenues.
Modelo is the leading beer in Mexico with about a 59% market share
in its home market, and Corona is the leading import beer brand
in 38 countries including the US. However in a separate agreement,
ABI had arranged to sell its stake in Crown Imports, the US distributor
of Modelo's products, to Constellation Brands (Ba1,
stable) specifically to avoid antitrust issues in the US.
While Moody's would view the loss of full ownership as the forfeiture
of a long-term strategic opportunity, the failure of the
transaction could be a positive for the credit in the short run,
since ABI's leverage could be reduced faster without the deal,
assuming as well that ABI continued to conservatively manage its balance
sheet. Furthermore, ABI would still retain the benefit of
its current approximately 51% interest in Modelo.
Bank financing for the proposed merger is already in place and ABI has
issued bonds as well, in part to reduce the amount of reliance on
bank funding. The bonds do not have call options, so Moody's
expects a temporary increase in cash holdings if the merger transaction
does not proceed. This will not, however, increase
in leverage over medium- to long run, as the proceeds from
the recent issuances intended for the acquisition will be used in the
course of on-going refinancing and other general corporate purposes
For further information on ABI, please see our research on the company
available at www.moodys.com.
The principal methodology used in rating ABI was the Global Alcoholic
Beverage Rating Methodology published in September 2009. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology.
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
Moody's says Department of Justice lawsuit is credit negative for A-B InBev but does not change rating or outlook
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
No Related Data.
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