FDBusiness.com

The US Department of Justice has reached a settlement with Anheuser-Busch InBev and Grupo Modelo that requires the companies to divest Modelo’s entire US business – including licenses of Modelo brand beers, its most advanced brewery, Piedras Negras, its interest in Crown Imports and other assets – to Constellation Brands, in order to go forward with their merger. The department said the proposed settlement will maintain competition in the beer industry nationwide, benefiting consumers.

On January 31, 2013, the department filed an antitrust lawsuit against ABI and Modelo alleging that ABI’s $20.1 billion acquisition of the remaining interest in Modelo that ABI did not already own, as originally proposed, would substantially lessen competition in the market for beer in the United States as a whole and in at least 26 metropolitan areas across the United States. The department alleged that the transaction would result in consumers paying more for beer and would limit innovation in the beer market.

“Before the merger, there were two competitors – Modelo and ABI – and ABI owned a substantial stake in Modelo. The companies’ proposed merger would have reduced those two competitors to one – ABI. The proposed settlement will create an independent, fully integrated and economically viable competitor to ABI. This is a win for the $80 billion US beer market and consumers,” says Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “If this settlement makes just a one percent difference in prices, US consumers will save almost $1 billion a year.”

The settlement requires ABI and Modelo to divest Modelo’s entire US business to Constellation or to an alternative purchaser if for some reason the transaction with Constellation cannot be completed. Specifically, the settlement requires ABI and Modelo to divest: the Piedras Negras brewery, Modelo’s newest, most technologically advanced brewery; perpetual and exclusive licenses of the Modelo brand beers for distribution and sale in the United States; Modelo’s current interest in Crown – the joint venture established by Modelo and Constellation to import, market and sell certain Modelo beers into the United States; and other assets, rights and interests necessary to ensure that Constellation is able to compete in the US beer market using the Modelo brand beers, independent of a relationship to ABI and Modelo.

AB InBev will sell Piedras Negras brewery and grant perpetual rights to Constellation for Corona and the Modelo brands in the US for $2.9 billion. Constellation will pay a further $1.85 bullion acquire 50% of Crown it does not own.