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Friday, April 12, 2024 | Back issues
Courthouse News Service Courthouse News Service

Feds Settle With Bud and Corona Makers on Merger

WASHINGTON (CN) - The makers of Budweiser and Corona resolved antitrust concerns over their planned merger by divesting certain subsidiaries, federal officials told the court Friday.

The United States had sued Anheuser-Busch InBev and Grupo Modelo in January to block their planned merger and preserve competition in the nation's $80 billion annual beer market.

InBev, of Belgium, bought St. Louis-based Anheuser-Busch for $52 billion in 2008. Anheuser-Busch InBev makes Busch, Budweiser, Michelob and other brands. Grupo Modelo's Corona meanwhile is best-selling imported beer in the United States. Together, they control 46 percent of the U.S. beer market.

Earlier this year, the parties told U.S. District Judge Richard Roberts that a revision to the proposed merger necessitated a stay of proceedings until March 19.

They said InBev planed 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.

Pleased with the terms, the Justice Department filed a proposed settlement with the court on Friday.

The deal gives Constellation Brands control over Modelo's entire U.S. business, including licenses of Modelo brand beers; its most advanced brewery, Piedras Negras; and its interest in Crown Imports.

Crown is the joint venture established by Modelo and Constellation to import, market and sell certain Modelo beers into the United States.

Divestiture of other assets, rights and interests will ensure that Constellation can compete in the U.S. beer market using the Modelo brand beers, independent of a relationship to ABI and Modelo, the Justice Department said.

"The proposed settlement announced today will create an independent, fully integrated and economically viable competitor to ABI," Assistant Attorney General Bill Baer said in a statement. "This is a win for the $80 billion U.S. beer market and consumers. If this settlement makes just a one percent difference in prices, U.S. consumers will save almost $1 billion a year."

The licensed Modelo brands include all seven brands that it currently offers through Crown in the United States: Corona Extra, Corona Light, Modelo Especial, Negra Modelo, Modelo Light, Pacifico and Victoria. Constellation will also acquire the licenses to three brands not yet offered in the United States, but currently sold by Modelo in Mexico: Pacifico Light, Barrilito and Leon.

To meet demand, Constellation has committed to expand the capacity of Piedras Negras, which had been Modelo's newest, most technologically advanced brewery.

In the interim, Anheuser-Busch InBev will enter into temporary supply and transition services agreements with Constellation.

"These agreements are time-limited to ensure that Constellation will become a fully independent competitor to ABI as soon as practicable," the Justice Department said.

Federal officials said they rejected an initial proposal by the beer makers to sell Modelo's stake in Crown to Constellation and enter into a 10-year supply agreement to provide Modelo beer to Constellation to import into the United States.

That arrangement would have served only to eliminate the Modelo brands as an independent competitive force in the United States beer market, the Justice Department said.

"Unlike the companies' original proposal, which left Constellation with no brewing assets and beholden to ABI for the supply of beer, the proposed settlement ensures that Constellation, or an alternative purchaser, will have independent brewing assets and the ownership of the Modelo beer brands for sale in the United States in perpetuity," according to the statement. "As a result, Constellation will fully replace Modelo as a competitor in the United States."

With 12 breweries in the United States out of 125 worldwide, Anheuser-Busch InBev has annual revenue of $39 billion, the Justice Department said. ABI owns more than 200 different beer brands, including Bud Light, the best-selling brand in the United States; Budweiser; Busch; Michelob; Natural Light; Stella Artois; Goose Island and Beck's.

The Justice Department said back in January that ABI had a 43 percent voting interest and 50.35 percent economic interest in Grupo Modelo before the merger plans. Its latest statement says that ABI holds a 35.3 percent direct interest in Modelo and a 23.3 percent direct interest in Modelo's operating subsidiary Diblo.

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.

Once the government publishes the proposed order, final judgment and competitive impact statement, in the Federal Register, the public will have 60 days to comment.

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