Constellation Brands, which currently owns 50% of Crown Imports, a 50-50 joint venture with Grupo Modelo, has signed a definitive deal with Anheuser-Busch InBev (AB InBev) to buy the remaining 50% stake in Crown for $1.85bn as AB InBev completes its proposed acquisition of Modelo.

Under the terms of the transaction, both Constellation Brands and Crown will handle all the distribution, marketing and pricing aspects of Modelo brands in the US.

AB InBev will take care of supply, quality of products and introduce innovations.

Constellation Brands president and chief executive officer Rob Sands said they have been the importer, marketer and seller of the Modelo brands in the US for almost two decades.

"Our full ownership of this significant beer business provides an additional strategic lever for driving overall profitable organic growth," Sands added.

"Crown is currently experiencing significant marketplace momentum driven by new products as well as innovation in advertising, marketing, promotions and packaging."

Crown Imports president Bill Hackett said this agreement provides certainty and continuity for Crown and its wholesaler partners.

"We look forward to continuing to work with our wholesaler network to further grow the Modelo portfolio of brands across the U.S. marketplace," Hackett added.

In the fiscal 2012, Constellation Brand has generated $2.47bn of net sales, $431m of operating income and $215m of equity earnings from Crown’s 164 million cases.

Constellation Brands chief financial officer Bob Ryder said upon closing, this transaction is expected to increase Constellation’s debt to comparable basis EBITDA leverage to the mid-four times range when factoring in a full-year of the additional Crown EBITDA.

"Due to the anticipated strong free cash flow generation of Constellation Brands, this leverage ratio should decrease to our targeted range of three to four times within the first 12 months after the close of the transaction," Ryder added.

The transaction is subject to regulatory approval and is expected to close in the first quarter of 2013.

Image: The $1.85bn transaction will help Constellation Brands increase its diluted EPS and free cash flow results. Photo: Constellation Brands, Inc.