Constellation Brands Inc (STZ.N) said it will buy Sculpin IPA-owner Ballast Point Brewing & Spirits for about $1 billion to enter the fast-growing craft beer market, in what will be its biggest acquisition since 2012.
Constellation does not expect the Anheuser-Busch InBev-SABMiller Plc colossus to hurt its market of high-margin Mexican brews such as Corona and Modelo in the United States, Chief Executive Rob Sands told Reuters.
"We focus almost fully on the high end of the beer business, and we are really focused only on the U.S. domestic business," Sands said.
The AB InBev (ABI.BR)-SABMiller SAB.L combination will produce a third of the world's beer. SABMiller's Miller brands, which will be bought by Molson Coors Brewing Co (TAP.N) and AB InBev's brands such as Budweiser are relatively cheaper.
Beer volumes in North America and western Europe have steadily declined in the past two decades as consumers shift to craft brews made by independent players, leading major beer companies to enter that market through acquisitions.
The $19.6 billion-U.S. craft beer market grew by about 18 percent in barrel volume in 2014, compared with a 0.5 percent increase in volumes in the U.S. beer industry, according to the Brewers Association.
San Diego-based Ballast Point makes more than 40 different types of craft beer and its brands also include Grapefruit Sculpin IPA.
Ballast Point is expected to have net sales of about $115 million this year, Constellation said in a statement.
The company, which will operate as Constellation's standalone craft business, employs more than 500 employees and has four facilities in the San Diego area, Sands said.
The deal, to be financed with cash and debt, is expected to close at the end of this year and add to 5-6 cents per share to Constellation's earnings in the year ending February 2017, the company said.
The Ballast Point deal will be Constellation's largest since 2012, when it bought the remaining 50 percent interest in Crown Imports LLC, its joint venture with Grupo Modelo S.A.B. de C.V for $1.85 billion.
Constellation Brands said in August it was setting up a venture capital arm to invest in smaller-scale new and distinctive concepts in alcoholic beverages, which may include craft beer.
Constellation's shares were up 1.5 percent at $134.18 in afternoon trading on the New York Stock Exchange.
(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Savio D'Souza)