Constellation Brands, Inc. announced today that it will submit to the U.S. Department of Justice a proposal to acquire a brewery operation from Grupo Modelo, a subsidiary of Anheuser-Busch InBev.
Constellation Brands will pay $600 million in the acquisition.
This brewery, located in Obregon, Mexico, is expected to have four million hectoliters of production capacity with minimal investment and optimization by Constellation after closing, the company says in a press release.
This transaction is subject to customary closing adjustments and U.S. Department of Justice and Mexican regulatory approvals.
The acquisition of the Obregon brewery allows Constellation to “immediately obtain functioning brewery capacity to support its fast-growing, high-end Mexican beer portfolio and provides flexibility for future innovation initiatives,” the company reports. It also enables the company to become fully independent from the interim supply agreement with Grupo Modelo.
As a result, Constellation will phase the buildout of 10 million hectoliters at Mexicali, with the first 5 million hectoliters of production capacity expected to become operational by December 2019, and subsequent capacity planned to align with future growth.
“We believe this is the right strategy to provide near-term capacity and greater flexibility to support our growth and innovation plans, while allowing for the buildout of our Mexicali brewery over an extended time period,” says Rob Sands, president and chief executive officer, Constellation Brands.
The Obregon brewery is located on Mexico’s west coast in the state of Sonora, and will help service Constellation’s largest beer markets in the western U.S. The majority of Obregon’s production is currently satisfying the interim supply agreement today, the company says, so it is expected to be a smooth transition during the continued expansion of the Nava brewery and the buildout of the Mexicali brewery.