March 29, 2024

DealBook: Anheuser-Busch Reaches Deal With Antitrust Regulators

Grupo Modelo makes Corona.Matt Rourke/Associated PressGrupo Modelo makes Corona.

2:20 p.m. | Updated

Anheuser-Busch InBev announced on Friday that it had received government approval for for its $20.1 billion deal to buy control of Grupo Modelo, the maker of Corona beer.

The Obama administration sued on Jan. 31 to block the takeover, arguing that the deal would give Anheuser-Busch InBev too much control over the American beer market, potentially reducing choices.

The agreement filed with the court on Friday resolves the regulatory concerns. Under the deal, Constellation Brands will pay about $5 billion to buy Anheuser Busch InBev’s 50 percent stake in Crown Imports, the company that imports Corona into the United States, as well as some breweries and operations. Constellation, one of the world’s largest wine companies, already owns half of Crown alongside Modelo.

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The Mexican Competition Commission approved the revised transaction in early April, the companies said.

Analysts have largely expected Anheuser-Busch InBev and the Justice Department to reach an accord on reasonable terms, The settlement makes clear, however, that for Anheuser-Busch InBev, the acquisition of Modelo was never about expanding its lead in the American beer market.

The prize for the largest American beer company was control of Modelo outside of the United States, which would give InBev the ability to grow Corona’s presence in Europe and to expand internationally all of Modelo’s nine other brands, which also include Pacifico, Modelo Especial and Negra Modelo.

Corona is the best-selling imported beer in the United States and overall is the No. 5 brand here. But there are few brands that are so well known in the Western Hemisphere that also have the potential for widespread growth as an import in the European market, analysts say.

American consumers are unlikely to see much of a change in the beer aisle. The proposed settlement, which still must be cleared by the United States District Court for the District of Columbia, will maintain Corona’s independence as a competitor to Budweiser and other Anheuser-Busch brands.

That was very important to the Justice Department. In its lawsuit to block the deal, regulators pointed to internal Anheuser documents in which company officials said that Modelo’s pricing strategy was “eating our lunch.”

William J. Baer, assistant attorney general in charge of the Justice Department’s antitrust division, said the settlement maintains Corona and other Modelo brands “as effective and aggressive price competitors.”

In the $80 billion American beer market, “even a 1 percent to 3 percent price change would have a huge consumer impact,” Mr. Baer said. Anheuser-Busch has consistently raised its prices in recent years, the department said, and losing Corona as a competitor could reach deep into Americans’ pockets.

Anheuser-Busch InBev, the world’s largest brewing company, was created in 2008 through the $52 billion merger of Anheuser-Busch and the Belgian-Brazilian brewer InBev. The $20.1 billion deal for Grupo Modelo would be the second-largest takeover in the beer industry after that merger, according to Thomson Reuters.

Article source: http://dealbook.nytimes.com/2013/04/19/anheuser-busch-reaches-deal-with-antitrust-regulators/?partner=rss&emc=rss

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

The deal would add Corona to Anheuser-Busch InBev's brands of beer.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.

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“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