AB InBev revises Modelo deal to meet U.S. objections

Thu Feb 14, 2013 4:57am EST
 

By Philip Blenkinsop

BRUSSELS (Reuters) - Anheuser-Busch InBev (ABI.BR: Quote), the world's largest brewer, has revised the terms of its $20.1 billion takeover of Mexican brewer Grupo Modelo (GMODELOC.MX: Quote) to overcome U.S. government objections that it would have restricted competition.

The U.S. Department of Justice (DOJ) filed a lawsuit to block the deal on the grounds that it removed an independent competitor and could have led to higher U.S. beer prices.

The DOJ was not convinced that AB InBev's related plan to sell its 50 percent share of U.S. beer importer Crown Imports to the world's largest wine company Constellation Brands (STZ.N: Quote) would have remedied that defect, since AB InBev would still have supplied Crown with Corona and other Modelo beers and had the option every 10 years to buy the whole of Crown.

AB InBev said on Thursday it had now agreed to sell Modelo's Piedras Negras brewery next to the U.S. border to Constellation and grant it perpetual rights for Corona and other Modelo brands in the United States, at a cost of $2.9 billion.

The U.S. beer market is currently dominated by AB InBev and MillerCoors, a joint venture between SABMiller (SAB.L: Quote) and Molson Coors Brewing Co TAP.N with a 30 percent share.

The DOJ had said that when the big two raised prices, the smaller Modelo often did not follow and took market share.

Bernstein Research said in a morning note it felt that the new deal, involving the complete divestment of the U.S. business of Modelo, should remove the DOJ's concerns.

Analysts have said the main benefits for AB InBev, which already has about a 50 percent share of the U.S. beer market, lie in Mexico and in driving Corona sales abroad.   Continued...

 
View of Anheuser-Busch InBev logo outside the brewery headquarters in Leuven June 25, 2012. REUTERS/Francois Lenoir