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Porsche, Corona Buyouts Tap New High End Consumers

VW's Porsche push mirrors Anheuser-Busch InBev's June buyout of Grupo Modelo, in a push to tap beer consumption in Central America and the export of its brands like Corona to international markets. After the acquisition, Anheuser-Busch InBev will own Corona, Pacifico, Brahma, Presidente, Quilmes, and Modelo branded beers in Latin America, putting it in stiff regional competition with Heineken, which owns Dos Equis, Tecate and Sol beers.

The combined company's beer making prowess draws in roughly $47 billion in annual revenue and has 150,000 employees spread across operations in 24 countries. "There is tremendous opportunity from combining two leading brand portfolios and further expanding Grupo Modelo's brands worldwide," said Carlos Brito, chief executive of Anheuser-Busch InBev, in a statement.

As part of the acquisition, Grupo Modelo will sell a 50% stake in Crown Imports, a distribution joint venture with Constellation Brands (STZ) for $1.85 billion. Constellation Brands will own the joint venture outright after the deal. Those proceeds, and $2.7 billion in net cash that Grupo Modelo generates annually will help AB InBev earn $15.5 billion a year in cash, according to JPMorgan calculations.

On the heels of the deal, AB InBev shares rose nearly $78, pushing shares to new all-time highs. Year-to-date, the company's shares are up over 25%.

Like with Porsche and VW's long-time takeover bout, AB InBev and Grupo Modelo haven't always seen eye-to-eye on their long-time partnership.

AB InBev effectively gained a non- controlling 50% stake in Modelo when InBev bought Anheuser-Busch in 2008 for $52 billion, in the biggest-ever beer merger. At the time, Modelo tried to prevent Anheuser-Busch from selling its minority stake to InBev as part of the merger and even signaled it would look to buy back Anheuser- Busch's non-controlling stake in the Mexican beer brewer, which the Budweiser bought in the 1990s.

The decision for long-time partners like Volkswagen and Porsche to hitch up in multi-billion dollar deals comes at an interesting time for corporate decision makers. According to Dealogic data, corporate mergers have stalled in 2012, with deal volumes in the first half of the year hitting the lowest point since 2010. In the second quarter, deal volumes fell to the lowest point since the third quarter of 2009, when the global economy was just emerging from the biggest slowdown since the Great Depression.

In a survey of corporate executives, Ernst & Young recently noted that a 43% year-over-year fall in U.S. M&A volume in 2012 is likely founded on a new C-Suite focus on divestitures and returns of capital to shareholders as a lever of growth. That contrasts with the past decade when companies looked at deals as a key driver of growth.

"[More] executives are coming to realize that effective portfolio management and corresponding divestitures can be essential to growth," said Ernst & Young, citing the benefits of using sale proceeds to reinvest in a core business or expand into new products and regions.

Even with widespread expectations of asset sales, its actually stake acquisitions such as VW and AB InBev's recent deals that appear to be driving 2012 M&A. The largest deal of 2012 - commodity trader Glencore's over $40 billion acquisition of mining giant Xstrate is merely the purchase of a remaining stake in the company. Similarly, in Yahoo!'s (YHOO - Get Report) $7.1 billion stake sale of Alibaba - the second largest U.S. asset divestiture -- the Chinese e-commece giant is trying to take control of its outstanding shares.

-- Written by Antoine Gara in New York
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