US sues to block $20bn AB Inbev takeover of Mexico’s Modelo

City A.M. Reporter
THE US government yesterday filed a lawsuit in a bid to stop Anheuser-Busch InBev (AB InBev) from buying the half of Mexican brewer Grupo Modelo that it does not already own, saying the $20.1bn deal could mean higher US beer prices.

AB InBev said it will fight back in federal court, calling the Justice Department’s decision to sue to stop the deal “inconsistent with the law, the facts and the reality of the market place.”

The company said in a statement, however, that it no longer expected the deal to close in the first quarter.

AB InBev, which bought Anheuser Busch in 2008, was the top US brewer by far with 47 per cent of the US beer market going into the Modelo deal. It owns 200 brands of beer, according to the Justice Department complaint.

Because of its scale, the company crafted an agreement under which AB InBev would sell Modelo’s 50-per cent stake in Crown Imports, its US distributor, to Constellation Brands for $1.85bn. Constellation was already Modelo’s partner in Crown. AB InBev said that since it would sell Modelo’s stake in Crown, its US market share would not go up.

But this did not satisfy the Justice Department. “If ABI fully owned and controlled Modelo, ABI would be able to increase beer prices to American consumers. This lawsuit seeks to prevent ABI from eliminating Modelo as an important competitive force in the beer industry,” it said in a statement.