Makers of Corona & Bud Could Advance Merger
(CN) - A revision to the proposed $20.1 billion merger of Anheuser-Busch InBev and Grupo Modelo purchase may stay federal antitrust proceedings until March 19.
This January, the Justice Department filed an antitrust complaint against Budweiser producer Anheuser-Busch InBev as it planned to acquire Grupo Modelo, maker of the country's best-selling imported beer, Corona.
The federal complaint, filed in the District of Columbia, sought to block the merger and preserve the competition for the nation's $80 billion annual beer market.
"Because of the size of the beer market in the U.S., even a small increase in the price of beer could result in billions of dollars of harm to American consumers," the Justice Department said in a statement.
InBev, of Belgium, bought St. Louis-based Anheuser-Busch for $52 billion in 2008. Anheuser-Busch InBev (ABI) makes Busch, Budweiser, Michelob and other brands. Together, InBev and Modelo control 46 percent of the U.S. beer market.
Anheuser-Busch InBev "generally acts as the price leader, implementing annual price increases in the sub-premium, premium and premium plus segments of the U.S. beer industry," the Justice Department said in its statement. "MillerCoors and other brewers have typically joined the ABI price increases, while Modelo has not. By pricing aggressively, Modelo - through its importer, Crown Imports - puts pressure on ABI to maintain or lower prices, especially in certain parts of the country. As a result, Modelo has become a particularly important competitor in the U.S. market."
Citing a revision to the proposed merger on Feb. 20, 2013, the Justice Department and InBev asked U.S. District Judge Richard Roberts to stay proceedings until March 19.
It said InBev plans to sell a brewery that produces certain Grupo Modelo beers to the Victor, N.Y.-based premium winery Constellation Brands Inc. InBev would also grant Constellation perpetual brand licenses for U.S. Grupo Modelo brands and other assets.
The parties said InBev is currently investigating whether the revised transaction resolves the competitive concerns alleged in the complaint.
The "defendants' position is that the revised transaction resolves the concerns raised in the complaint," according to the joint motion. "The parties agree that a stay of litigation proceedings until March 19, 2013 would be beneficial to the parties and conserve efficient use of the court's resources while this investigation, and the parties' discussions regarding a potential resolution of this litigation, take place."
Crown Imports LLC and Constellation - which moved to intervene on Feb. 8 - consent to the proposed stay, as well, the parties said. The U.S. has yet to respond to their motion to intervene, however.
The parties will file a joint status report with the court by March 19, and, if efforts at resolution are unsuccessful, propose a scheduling order for the remaining proceedings.
Anheuser-Busch InBev has annual revenue of $39 billion, the Justice Department said. It also has a 43 percent voting interest and 50.35 percent economic interest in Modelo. It wants to buy up the rest of it.
Modelo, based in Mexico, has annual reported revenue of $7 billion.
Constellation Brands boasts 4,300 employees, sales in 125 countries and operations at 40 facilities worldwide, according to its website. Its products include Robert Mondavi, Clos du Bois, Kim Crawford, Inniskillin, Franciscan Estate, Ruffino, Simi, Estancia, Corona Extra, Black Velvet Canadian Whisky and Svedka Vodka.
Crown Imports LLC is a joint venture between Mexico's leading beer company, Grupo Modelo SA de CV, and Constellation Brands, according to its website. It imports and markets Corona Extra, Corona Light, Modelo Especial, Negra Modelo, Pacifico, Victoria and Tsingtao beer across the U.S.