AB InBev - Agreement with DoJ on Modelo

AB InBev announced last Friday during trading hours it has, together with Grupo Modelo, Constellation Brands and Crown Imports, reached a final agreement with the US Department of Justice regarding the terms for settling the US DoJ’s litigation against AB InBev’s proposed full takeover of Grupo Modelo.

The parties have now approached the Court with the details of this proposed settlement. An approval of the Court would fully resolve the US DoJ’s claims in this litigation. AB InBev commented that the agreement is ‘sustantially in line’ with the revised transaction as announced mid February. The proposed Final Judgment presented to the Court is said to include additional binding commitments, to ensure the prompt divestiture of certain identified assets to Constellation (ie US brand rights on Modelo beers and the Piedras Negras brewery), as well as the necessary expansion of the Piedras Negras brewery and certain distribution guarantees for Constellation.

Meanwhile the Mexican Competition Commission also approved the revised transaction with Constellation.
AB InBev now expects the transaction to close in June 2013.
 
Our View:
After AB InBev recently already announced an agreement in principle with the US DoJ, the news about a final agreement is no surprise. Despite the forced divestment of the Piedras Negras brewery, we still think this transaction makes a lot of sense for AB InBev, adding a new very attractive & profitable beer market to its portfolio (Mexico), with also significant international expansion potential for Corona, We remind as wellthat AB Inbev (76,18 EUR, 0,77%) expects to reap $ 1bn synergies out of this transaction and that the deal should be immediately EPS accretive. No changes to our earnings model for now (which already includes Grupo Modelo as of mid 2013). We also maintain our Hold rating and € 75 target price.