TEXT-Fitch affirms Anheuser Busch InBev on Grupo Modelo acquisition

Mon Jul 2, 2012 7:30am EDT

July 02 - Fitch Ratings has affirmed Anheuser Busch InBev's (ABI) Long-term Issuer Default Rating (IDR) and senior unsecured rating at 'A' and Short-term IDR at 'F1'. The Outlook on the Long-term IDR is Stable. The senior unsecured ratings of the debt of ABI's subsidiaries Anheuser Busch InBev Worldwide Inc, Brandbrew S.A. and Anheuser-Busch Companies Inc are also affirmed at 'A'/'F1'.

The affirmation follows ABI's announcement that it will be buying 50% of leading Mexican brewer Grupo Modelo S.A.B. de C.V. for a net cash disbursement, following asset divestments of USD1.85bn and an equity portion of the price of USD1.5bn, of USD14.2bn.

Thanks to its free cash flow (FCF; USD6bn in 2011) generation, Fitch calculates that ABI should be in a position to see an only marginal increase in leverage following the transaction.

ABI's lease adjusted net debt / operating EBITDAR is expected to drop to 2.0x at YE12 and return to this level at YE14, despite a temporary increase to potentially up to 2.1x-2.3x during 2013 as a result of the USD14.0bn disbursement.

Modelo, which had EBITDA of USD2.1bn in 2012 and paid a dividend of approximately USD0.7bn to ABI, generated a pre-dividend FCF of USD1.6bn, which will contribute to enhance ABI's FCF from 2013.

Through the acquisition - which is expected to close during Q113, ABI will gain access to the growing, duopolistic Mexican market and should, other than in the US, be able to further exploit the exports potential of the well known Corona brand, which is already present in many markets of the world. Additionally, Fitch is confident that under the ownership of ABI, Grupo Modelo's EBITDA margin of just under 30% in 2011 may grow thanks to cost synergies closer towards ABI's 39% margin.

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