MOODY'S CONFIRMS ANHEUSER-BUSCH'S RATINGS (SR. AT A1) FOLLOWING ANNOUNCEMENT OF INCREASED INVESTMENT IN MODELO
New York, 5/23/1997 -- Moody's Investors Service confirmed the A1 long-term and Prime-1 short-term ratings of Anheuser-Busch Companies, Inc. in response to the company's announcement that it has increased its ownership of Grupo Modelo -- Mexico's largest brewer -- from 17.7% to 37%, and that its board of directors has authorized the exercise of options that will take this position to 50.2% by the end of 1997. As a result of these transactions, and an aggressive dividend and share repurchase program, Anheuser's outstanding debt will rise significantly and its margins of debt protection will narrow. Nevertheless, Moody's expects that the current ratings will remain adequately supported by Anheuser's reliable cash generation, and its dominant position in the U.S. beer market. We also expect that Anheuser will demonstrate a willingness to modify the size and pace of future distributions to shareholders, and thereby preserve appropriate levels of financial flexibility, if it undertakes additional large investments to further expand its international beer operations.
The rating outlook for Anheuser-Busch is as follows:
Due to the limited growth prospects in the U.S. beer market -- which accounts for over 90% of its operating income -- large share repurchases are a significant element of Anheuser's plan to deliver double-digit growth in earnings per share. Moreover, as the dominant brewer in the U.S. and the owner of the domestically powerful "Budweiser" brand name, Anheuser may explore further opportunities to expand its international operations through large joint ventures and acquisitions. Pursuing such strategically important opportunities could result in pressure on the company's ratings unless offset by actions that help preserve solid debt protection measures and an appropriate capital structure.
Anheuser-Busch Companies, Ins., headquartered in St. Louis, is the world's largest brewer and holds a 45% share of the U.S. beer market. Grupo Modelo, headquartered in Mexico, is that country's largest brewer with a market share of more that 57%.
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