In the past few week, recent developments in Anheuser-Busch InBev and SABMiller’s expansion plans have drawn attention from investors looking to quench their thirst for opportunity in the beverage market.
Anheuser-Busch InBev and Group Modelo
Back in June, Anheuser-Busch InBev (NYSE: BUD) announced it would acquire the remaining 50% stake in Mexico-City-based Group Modelo in all-cash transaction of $20.1 billion. The announcement excited investors, as shares of Anheuser-Busch InBev rose almost 9% that same week. Since June, the firm’s share price rose to almost $95 (now down to $85, still up from $73 a half year ago) following extremely positive performance. Early last week, however, the Department of Justice filed a lawsuit looking to block the acquisition, which knocked off $10bn in market value for AB InBev. While the current share price of $85 may not seem like a bargain, the recent dip could make now the opportune time to hop on to Anheuser-Busch InBev.
AB InBev, the world’s largest brewer, controls almost a quarter of the global market share and brought in more than $39bn in revenues in 2011. AB InBev, looking to expand its dominance in the beverage market, identified Group Modelo as a great acquisition target; with 63% of the Mexican beer market and brands such as Corona and Modelo, the firm seemed to be a perfect fit. The Department of Justice, however, has a couple qualms with the deal; first, the acquisition would lead to too much consolidation in the US beer market and secondly would give AB InBev too much power in the supply and distribution chain. Certain analysts predict that AB InBev and the DofJ could reach a settlement that would include the sale of certain assets, such as bottling plants, which would make the deal more favorable in the eyes of the government.