Antitrust deal will allow merger of Anheuser and Modelo

  • Article by: EDWARD WYATT
  • New York Times
  • April 19, 2013 - 9:20 PM

– Anheuser-Busch InBev, the country’s largest brewer, agreed Friday to sell the U.S. rights to several foreign brands, including the top-selling Corona, in a deal that regulators say will ensure competition in beer prices.

The settlement of the Justice Department’s antitrust lawsuit means that Anheuser-Busch InBev, which controls 39 percent of the U.S. beer market, can go ahead with its $20.1 billion takeover of Grupo Modelo of Mexico, the brewer of Corona.

As part of the agreement, however, Anheuser will sell Modelo’s 50 percent stake in Crown Imports, which distributes Corona and other Modelo brands in the United States, to Constellation Brands, which already owned the other half.

For U.S. consumers, the agreement will help keep beer prices down, government officials say, although there will be little practical effect on what beer buyers will see when they go shopping.

“This is an $80 billion market,” said William Baer, an assistant attorney general who oversees the Justice Department’s antitrust division. “Even a 1 percent price change would cost consumers $1 billion a year. This agreement will help to keep the market competitive, dynamic and quite healthy.”

The Justice Department’s antitrust division filed a lawsuit in January to block the merger. The government’s opposition was a big blow to Anheuser-Busch InBev, which saw the acquisition as vital to its push to expand in Mexico and the rest of Latin America. In February, the two sides announced that they were in talks to resolve the antitrust concerns.

The settlement will leave Constellation — one of the country’s largest wine producers — with full and permanent rights to make and sell Corona, Corona Light, Modelo Especial, Pacifico and six other brands in the United States.

“Ultimately, nothing will change for consumers in the U.S. as a result of this transaction,” said Laura Vallis, a spokeswoman for Anheuser-Busch InBev. “The proposed combination with Grupo Modelo has always been about Mexico, and making Corona more global in markets other than the United States. Beers that Mexican consumers enjoy and appreciate will now get a larger worldwide presence.”

Constellation will pay $5.5 billion for Modelo’s share of Crown and for the Piedras Negras brewery, a new production and bottling plant in Mexico, just over the Rio Grande River southwest of San Antonio, Texas.

Rob Sands, president and chief executive of Constellation, called the deal “the most transformational event in the history of our 68-year-old company,” one that would double sales and significantly increase profits and free cash flow.

Anheuser-Busch InBev is itself the result of a $52 billion merger in 2008 between the maker of Budweiser and a Belgian-Brazilian brewer. It was looking to expand internationally and wanted to secure the rights to sell Corona and Modelo’s other Mexican brands around the world.

Corona is the top-selling imported beer in the United States and the fifth-largest seller overall.

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