AB InBev's Modelo deal may happen Friday-sources

LONDON Thu Jun 28, 2012 5:22pm EDT

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LONDON (Reuters) - Anheuser-Busch InBev (ABI.BR) could announce a deal on Friday to buy the half share of Mexico's Grupo Modelo (GMODELOC.MX) it does not already own for around $15 billion, the latest of a string of deals as big brewers look for growth from emerging markets, people familiar with the matter said.

The world's biggest brewer is in advanced talks with the family shareholders who control Modelo and bankers were working on Thursday to put the final touches on a deal that is anticipated to be in cash rather than shares, they added.

"Both parties are ready to do a transaction. We would expect the deal to be announced tomorrow as the final details are now being worked upon," said one person with knowledge of the situation.

The Budweiser and Beck's brewer was attracted to Modelo by a growing Mexican beer market and potentially large cost savings in distribution and procurement, which analysts forecast to be worth at least $250 million a year.

"It's a very developed situation and we're in the middle of it," said another person close to the situation.

Modelo, founded in 1925, is Mexico's biggest brewer with a 50-percent-plus market share where it operates in a virtual duopoly with Heineken NV's (HEIN.AS) FEMSA. The company's biggest brand, Corona Extra, is the top imported beer in the United States.

Both AB InBev and Modelo declined to comment.

The Modelo families, which have 56 percent of shareholder votes, have seen the brewing group's shares rise over 40 percent over the last 12 months, even before AB InBev and Modelo admitted to talks earlier this week, which pushed the shares even higher.

"A share tender has been devised to accommodate the demands of the Modelo group of family shareholders," said an adviser close the talks.

AB InBev inherited its 50.4 percent stake in Modelo when it acquired Anheuser-Busch for $52 billion in 2008 and Anheuser-Busch itself had held takeover talks with Modelo to fight off the hostile bid from InBev, so the potential structure of a deal has long been discussed.

The Modelo controlling families went to court to claim the deal broke an agreement that Modelo should have been consulted, but when they lost in 2010, AB InBev Chief Executive Carlos Brito started the courtship.

The two brewers confirmed on June 25 that they were in talks regarding their current relationship, which follows a series of deals as large brewers look to expand in growing beer markets and cut costs.

In April, AB InBev agreed to buy the Dominican Republic's Cerveceria Nacional Dominicana for more than $1.2 billion, while in the same month, Molson Coors Brewing Co (TAP.N) bought East European brewer StarBev for 2.65 billion euros ($3.5 billion), and last year, SABMiller Plc (SAB.L) purchased Foster's for $11.8 billion.

Many analysts have already warmed to the potential Modelo deal and AB InBev shares have been rising this week and closed up 0.8 percent at 59.01 euros on Thursday.

"Nothing is fully inked yet, but strategically and we would contend financially, the tie up makes perfect sense for both parties ... We view the probability of a deal as very high," said analyst Martin Dolan at Espirito Santo investment bank.

There might be an additional deal to include the buyout of Modelo's joint venture with Constellation Brands Inc (STZ.N), which imports Corona Extra into the United States.

Analysts estimate that could cost a further $1.75 billion if AB InBev wants to close the deal earlier rather than see it run its course until 2016, although this would likely cause U.S. anti-trust concerns.

AB InBev already has about 49 percent of the U.S. beer market and adding an extra 5 percent for Corona would almost certainly attract the U.S. authorities. AB InBev might have to sell off some of its smaller beer brands.

(Reporting by Tessa Walsh and David Jones; editing by Victoria Howley and Andre Grenon)

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