Owens-Illinois (OI) has agreed to enter into a 50-50 joint venture with Constellation Brands to operate the glass container production plant in Nava, Mexico, that the latter company has recently agreed to purchase from Anheuser-Busch Inbev.
The plant will provide bottles exclusively for Constellation’s adjacent brewery, which brews a leading portfolio of Mexican beer brands for export to the US, including Corona Extra, Corona Light, Modelo Especial, Negra Modelo and Pacifico.
To help meet current and rising demand from Constellation’s brewery, the joint venture plans to expand the plant from one furnace to four over the next four years.
O-I and Constellation will each initially contribute approximately US$100 million to the joint venture.
The capacity expansion, which is expected to cost approximately US$350 million, will be financed by equal contributions from both partners.
O-I will account for the investment and returns as an equity joint venture.
Meanwhile, the company has agreed to enter into a long-term agreement to supply glass containers to Constellation’s Nava brewery.
Supply under the agreement, primarily from O-I’s plant in Waco, Texas, begins in late 2015, ramping up significantly in the following year.
O-I is expected to supply the output from at least one furnace under this agreement.
After the joint venture expansion is complete, supply under the agreements will add the equivalent of approximately 20% of O-I’s existing North America production.