Anheuser-Busch InBev and Grupo Modelo last week bought more time to work out the specifics of a proposed $20.1 billion merger that a Department of Justice antitrust suit has threatened to derail.
A federal judge on Thursday granted a delay of litigation in the case the DOJ filed Jan. 31 to block Belgian brewer A-B InBev, the world’s top beer-seller, from purchasing Mexican brewer Modelo, the world’s No. 6 beer-seller. The brewers and government prosecution said Wednesday they were negotiating a possible settlement in hopes of avoiding trial. They have until March 19 before the case resumes.
The stay of litigation comes in the wake of A-B InBev‘s recent revision of its plan to acquire the 50 percent of Modelo that it does not already own. The revision features concessions designed to ease DOJ concerns.
In a Feb. 14 press release, A-B InBev announced those proposed concessions, which include the $2.9 billion sale of Modelo’s Piedras Negras brewery and the U.S. import rights of Corona and the Modelo brands to New York-based Constellation Brands, the world’s largest wine company.
In the suit filed Jan. 31, the DOJ said that allowing the buyout could lead to price increases on beer sold in the United States by eliminating Modelo, which it viewed as a key competitor to top brewers A-B InBev and MillerCoors. The government said that Modelo, whose brands include Corona and Pacifico, strategically priced its beers to compete with the top two U.S. beer-sellers.
In a press release the day the DOJ filed its suit, A-B InBev called the lawsuit “inconsistent with the law, the facts, and the reality of the marketplace.” However, the world’s largest brewer has since come to the table with concessions.
A-B InBev anticipated the government’s antitrust concerns when it first reached its agreement with Modelo last June. In an apparent attempt to appease those concerns, the initial acquisition included an agreement for A-B InBev to sell Modelo’s 50-percent stake in Crown Imports — a joint venture between Modelo and Constellation — to Constellation for $1.85 billion.
But according to a Thursday report from Reuters, the government found the deal inadequate since A-B InBev would still have supplied Crown with Modelo products and because the company gave itself the right to exercise a call option for 100 percent of Constellation every 10 years.
If A-B InBev’s latest concessions or subsequent offers before March 19 are not enough to sway the DOJ, the government’s case will hinge on proving the takeover of Modelo is illegal because it violates the Clayton Act, which was designed to stop mergers and acquisitions that would hinder competition.
A-B InBev itself is the product of eight different mergers and acquisitions that took place between 1987 and 2008, giving rise to the world’s top beer seller.