DealBook: Justice Dept. Seeks to Block $20 Billion Merger of Brewers

Carolyn Kaster/Associated PressThe deal would add Corona to Anheuser-Busch InBev’s brands of beer.

4:06 p.m. | Updated

The Justice Department sued on Thursday to block Anheuser-Busch InBev’s proposed $20.1 billion deal to buy control of Grupo Modelo of Mexico, arguing that the merger would significantly reduce competition in the American beer market.

The deal, announced last summer, would add Corona Extra to the company’s formidable stable of brands, including Budweiser and Stella Artois.

But the Justice Department said in its lawsuit, filed in Federal District Court in Washington, that allowing the merger to proceed would reduce competition in the beer industry across the country as a whole and in 26 metropolitan areas in particular. The combined company would control about 46 percent of annual sales in the country, the government said, far outpacing Anheuser-Busch InBev’s closest competitor, MillerCoors.

Related Links

• Documents: Justice Dept. Suit | News Release
• Justice’s Fight Against Modelo Deal Brings in a Familiar Face
• Anheuser-Busch InBev to Buy Rest of Maker of Corona Beer (June 29, 2012)

“Even small price increases could lead to significant harm,” William J. Baer, head of the Justice Department’s antitrust division, said on a conference call with reporters. “We took this action today because we believe the acquisition is a bad deal for American consumers.”

The deal is the biggest to be opposed by the Justice Department since 2011, when it sued to block ATT’s proposed $39 billion takeover of T-Mobile USA.

The government’s move is the first significant effort to halt widespread consolidation in the beer industry in some time. Anheuser-Busch InBev itself was the product of a blockbuster merger between two of the world’s biggest brewers, and one of MillerCoors’s parents is the acquisitive SABMiller.

In its complaint, the Justice Department said Modelo had served as a low-price counterbalance to its larger competitors, resisting the price increases Anheuser-Busch InBev has promoted regularly.

The government derided the main concession offered by Anheuser, a deal to sell Modelo’s stake in its main United States importer to Constellation Brands, as creating a “facade of competition.” The Justice Department’s complaint highlighted an memorandum that the chief executive of the importer, Crown Imports, sent to his employees soon after the Modelo deal was announced. “Our #1 competitor will now be our supplier,” the executive, Bill Hacket, wrote in the memo.

In a statement, Anheuser-Busch said, “We remain confident in our position, and we intend to vigorously contest the D.O.J.’s action in federal court.”

Article source: http://dealbook.nytimes.com/2013/01/31/justice-dept-seeks-to-block-anheusers-deal-for-modelo/?partner=rss&emc=rss