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Porsche, Corona Buyouts Tap New High End Consumers

NEW YORK (TheStreet) -- An uncertain U.S. economy and the prospect of a Eurozone meltdown isn't stopping some longtime auto and beer partners from taking the plunge on big buyouts.

In consecutive weeks, the decisions by German auto giant Volkswagen to buy out a 50.1% stake in sports car maker Porsche for $5.6 billion, and Anheuser-Busch InBev's (BUD) $20.1 billion deal to take control of Grupo Modelo, the maker of Corona beer, are the latest signs that amid a generally cautious M&A environment some corporate giants are buying out partners to scale their brands and operations, in anticipation of future opportunity.

The deals also come at a time of consolidation in the beer sector and as global automakers -- including growing emerging market players -- focus on diversifying and scaling their businesses to offer a spectrum of vehicles from hybrids and sedans to sports cars and trucks.

In the long-anticipated buyouts of Porsche and Grupo Modelo by Volkswagen and AB InBev, both deals target longtime family-owned partners that will help the respective auto and beer conglomerate's scale their operations and diversigy into new markets. After ending what's been a seven-year takeover battle between it and Porsche, Volkswagen will be able to fully integrate the Carrera and Boxter maker's designs to its vehicle fleet and production facilities, which already make VW the largest automaker in Europe.

Meanwhile, after buying out a long-held near 50% stake in Mexico's Grupo Modelo, AB InBev will acquire Corona, the most exported brand of beer to the United States, in a deal that will help world's largest beer conglomerate and the maker of Budweiser grow its brands in Latin America, one of the fastest growing markets, as suds sales in North America and Western Europe are expected to drop in coming years, according to Euromonitor.

While both deals are different in structure - Porsche's sale to Volkswagen comes after it raised nearly 10 billion euros of debt in a takeover attempt of VW in 2008 - they are similar in their objectives.

Porsche and Corona are highly recognizable brands in key markets where VW and AB InBev are lacking in presence. Synergy in both deals will come from some obvious short-term cost cuts as overlapping operations are integrated; however, in both instances, existing partnerships mean that deal benefits will also be a lasting revenue opportunity.

The mergers will also be a competitive boost after beer makers like Molson Coors (TAP), SABMiller (SBMRY) and Heineken (HINKY) cut big deals to push into new markets -- and emerging market auto giants like Tata and Geely Automotive buy up brands like Land Rover, Jaguar and Volvo from the likes of Ford (F) in an expansion into luxury vehicles.

In both competitive challenges -- emerging market beer consumers and luxury autos -- global conglomerates are fighting for faster than industry average sales growth. In June auto sales, it was the likes of luxury auto brands like Porsche, Mercedez (DDAIF) and VW's Audi brand that posted among the industry's best results. Meanwhile, beer giants have recently cut multi-billion dollar deals for Presidente of the Dominican Republic, Australia's Fosters and StarBev of the Czech Republic, in an effort to diversify from lackluster developed market sales.

Still, Volkswagen and AB InBev are differentiated in their acquisitions of Porsche and Grupo Modelo relative to other recent auto and beer deals because of their long-lasting partnerships.

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