Anheuser-Busch to Sell Brewery and U.S. Beer Rights to Fend Off DOJ Antitrust Claims
In the wake of an antitrust lawsuit filed by the U.S. Department of Justice
(DOJ) seeking to enjoin the acquisition of Mexican brewer Grupo Modelo,
Anheuser-Busch InBev (ABI) has reportedly agreed to sell a massive Modelo
brewery, including full U.S. rights to the Corona® and Modelo® brands, to
Constellation Brands, said to be the world’s largest wine company, for $2.9
billion. Additional information about the antitrust litigation appears in Issue
469 of this Update. The brewery, Compañía Cervecera de Coahuila, situated
near the U.S.-Mexico border, produces Corona®, Corona Light® and Modelo
Especial®.
Constellation, which filed a motion to intervene in the DOJ lawsuit to protect its interests, stands to gain greater access to the American beer market under a revised agreement that would establish Constellation’s Crown Imports beer division as completely independent. Under the deal’s original terms, Constellation would have paid its joint venture partner Modelo $1.85 billion for the 50 percent share it does not already own in Crown Imports, but would have entered an exclusive agreement with ABI to supply Constellation with Modelo beer to import into the United States.
If DOJ were to prevail, it was apparently anticipated that Modelo would seek to buy out Constellation’s stake in Crown, a move that would leave Constellation with a predominantly wine-based business characterized by “agricultural volatility and little brand loyalty.” Among Constellation’s brands are Robert Mondavi® and Ravenswood®. After the revised agreement became public, Constellation’s share price reportedly climbed nearly 36 percent in early trading on February 14, 2013.
DOJ’s concern with the original agreement was that it would increase ABI’s
control of the American beer market and allow it to charge more for the
products while reducing choice for local consumers. ABI CEO Carlos Brito
reportedly said, “We decided to restructure the transaction to address
concerns from the Justice Department. We are focused on getting this to the
finish line.” DOJ did not offer any comment on the proposal other than to
indicate that it would give any proposal serious consideration as it continues
“to prepare for litigation.” See Reuters, February 8, 2013; The New York Times,
February 14, 2013.
