By Uma Kakde, Kristin O’Planick, Kevin Shuller, and Jennifer Walvoord under the supervision of Professor Andrew Karolyi - 16 pages. Current version dated: 06/17/2010.
View full case study
On June 13, 2008, Carlos Fernandez, Chairman and CEO of Grupo Modelo S.A., had just finished a call with August Busch IV, the CEO of Anheuser-Busch (A-B), the iconic North American brewery that owned 50.2% of Modelo’s shares. A-B had recently received a takeover offer from industry giant InBev, and Busch feared that the shareholders would accept it, ending the storied brewer’s 150-year history as an independent company. Ever since InBev made its move for A-B, Busch IV had been hinting at making Modelo an offer for its remaining shares, thus making the Mexican brewer a wholly-owned subsidiary and making Anheuser-Busch too large for InBev to acquire.
Modelo had three options: it could try to buy back its stake from A-B, it could sell the rest of the company to A-B, or it could refuse to sell, thereby increasing the likelihood of the potential A-B/InBev merger. Each option had its benefits, but in the end Fernandez knew the decision would be less about price and more about control.
Fernandez had a lot to consider: Grupo Modelo was an icon in its country—Mexico’s largest brewer and a source of national pride. How would the Mexican public feel if its hallmark company was acquired by Americans? But the alternative may well be a de facto acquisition by InBev, which would own half of Modelo if the deal went through.
Fernandez looked over the options again and considered the pros and cons. Whatever option he chose, he knew he would have to make a compelling case to his board to convince all of them that his recommendation would maximize value for Modelo. He needed to have a recommendation and a minimum acceptable bid price for Modelo’s board soon. The InBev offer was dominating the headlines in business sections worldwide, and Fernandez knew he had no time to waste.
In this case students get a chance to look at a complicated acquisition proposal that involves three companies. Of the three, Grupo Modelo was in the worst situation and faced a tough choice as all of its options involved sacrificing a part of the company. This gives students an interesting opportunity to discuss what they value most in a company, along with which option they think is best for Grupo Modelo and why.
- Emerging Markets Corporate Strategy
- International Finance
- Cross-border mergers and acquisitions
- Investment Management
- Investment Risk Assessment
Mexico; United States.
Supplementary Materials Available
Teaching Note (Upon request from the case supervisor)