* AB InBev deal for Modelo could be worth up to $15 billion
* Price is main sticking point
* Mexico a growing beer market
* Deal would give AB InBev control of Corona US imports
* AB InBev shares up 2.8 pct, among strongest in Europe
By Philip Blenkinsop and David Jones
BRUSSELS/LONDON, June 25 Mexico's growing beer
market, big cost savings and control of Corona beer exports have
attracted Anheuser-Busch InBev towards a $15 billion
buy out of Grupo Modelo, sources said on Monday.
The deal would give AB InBev, the world's largest brewer
access to 2-3 percent annual growth in the Mexican market, make
at least $250 million of synergies and win distribution rights
to Corona, the largest U.S. imported beer brand.
The brewer of Budweiser and Stella Artois already owns a
50.4 percent stake in Modelo and is currently in talks to buy
the rest from the Modelo controlling families, who have 56
percent of the shareholder voting power, the sources added.
Mexico is the world's sixth biggest beer market and the
fourth most profitable and is a virtual duopoly between Modelo
and Heineken. Analysts say it would be a good
strategic deal for AB InBev.
"We believe a take-out price would be closer to $15 billion,
equating to a 30 percent control premium in line with historic
average brewing premiums," said analysts at Citi.
Analyst Pablo Zuanic at brokers Liberum Capital says Modelo
shares currently trade on 10.7 times core profit, or EBITDA, and
he would expect a deal at 13-15 times with the mid-point giving
a value for the half stake in Modelo at $14.8 billion.
Modelo has a 50-percent-plus market share of the Mexican
beer market, but a relatively low profit margin of around 26
percent which AB InBev would look to push towards the margin of
60-65 percent it earns in Brazil.
AB InBev declined to comment on a possible deal, while
Modelo spokeswoman Jennifer Shelley said the company does not
comment on rumour or speculation.
Banking sources said the two sides were in close talks but
the sticking point was the size of the premium the Modelo
families can extract from AB InBev.
"The families are willing to sell but they want a big price
as they see a big boost for AB InBev from owning 100 percent of
Modelo," said one banker close to the talks.
The move would increase AB InBev's focus on North and Latin
America which already accounts for over 90 percent of profits
with its half share of the U.S. market and 70 percent of Brazil.
AB InBev inherited its stake in Modelo when InBev bought
Anheuser-Busch in 2008 for $52 billion, and after sharply
cutting debt and reported free cash flow of $9.1 billion in
2011, the group has scope to finance a possible deal in cash.
It would be the latest in a series of changes in the global
brewing industry as companies seek growth in emerging markets
and look to make big savings in procurement and distribution.
In April, AB InBev agreed to buy Dominican Republic's
Cerveceria Nacional Dominicana for more than $1.2 billion, while
in the same month Molson Coors bought East European
brewer StarBev for 2.65 billion euros ($3.5 billion), and last
year SABMiller purchased Foster's for $11.8 billion.
A deal between Mexico City-based Modelo and AB InBev could
finally end what has been a rocky relationship since 2008, when
Modelo launched an arbitration case claiming it was not
consulted about InBev's acquisition of Anheuser-Busch.
The way was cleared for AB InBev to increase its Modelo
stake when the Mexican brewer lost the case in 2010, but Modelo
Chief Executive Carlos Fernandez said controlling shareholders
would not sell their stake.
Analysts said AB InBev taking on the import rights for
Corona beer in the U.S. could cause anti-trust problems in the
U.S. because of its high market share, but said it could get
around this by selling off some of its smaller beer brands.
Corona is currently imported into the U.S. through a joint
venture with Constellation Brands in an agreement which
runs until 2016, and if AB InBev wanted to break this deal early
then it would have to pay Constellation compensation.
AB InBev stock, up 43 percent over the last year, was 2.8
percent higher at 57.19 euros at 1315 GMT, making it among the
strongest in the FTSEurofirst 300 index of leading
Modelo shares rose 9.6 percent in early trading, after
having risen 41 percent in the past 12 months.
"The logic is that they take control . Then they get to push
through the cost savings plans that they've carried out in the
rest of the world," said analyst Gerard Rijk at brokers ING.