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DOJ Challenges Deal To Merge Budweiser And Corona



The government said the deal could lead to higher beer prices in this country because it would substantially reduce competition in the U.S. beer market, particularly in 26 metropolitan areas. It said the merged firm would control nearly half the beer sales in the U.S.

The Justice Department on Thursday filed a lawsuit to stop Anheuser-Busch InBev’s proposed $20.1 billion purchase of Mexican brewer Grupo Modelo, which would unite the ownership of popular beers like Budweiser and Corona.

The government said the deal could lead to higher beer prices in this country because it would substantially reduce competition in the U.S. beer market, particularly in 26 metropolitan areas. It said the merged firm would control nearly half the beer sales in the U.S.

In response, Anheuser-Busch InBev promised a court fight to preserve its deal. Americans spent at least $80 billion on beer last year. ABI’s Bud Light is the best-selling beer in the nation and Modelo’s Corona Extra is the best-selling import.

The Justice Department’s lawsuit in federal court in Washington, D.C., seeks to prevent the merger and to continue competition between the firms.

Bill Baer, the assistant attorney general in charge of the department’s antitrust division, says Anheuser-Busch InBev (ABI) would be able to increase beer prices to U.S. consumers if the merger were to go through.

ABI is the largest U.S. brewer and Modelo is the third and together, the two firms control about 46 percent of annual sales in the U.S. MillerCoors, the second-largest beer company, accounts for 29 percent of nationwide sales.

According to court papers filed in the case, ABI acts as the industry price leader, with MillerCoors and other brewers typically joining the price increases set by ABI. Modelo, in contrast, has not joined.

The government lawsuit harms the chances of Constellation’s related $1.85 billion deal that would land it greater U.S. control of Corona and other beers. Constellation was to buy the remaining half of a joint venture with Grupo Modelo, Crown Imports LLC, that has allowed Constellation to import, market and sell Modelo beers in the U.S. for nearly 20 years.

The deal with Constellation was intended to alleviate antitrust concerns. But the Justice Department said that it wasn’t enough to protect U.S. beer buyers. Constellation had said its deal would have made it the third biggest total beverage alcohol company in the U.S.

U.S. based Anheuser-Busch was purchased by Belgium-based InBev in 2008. The combined company is already the world’s biggest brewer and makes Budweiser, Beck’s and Stella Artois, among others. Its purchase of Grupo Modelo would have given the combined company annual sales of $47 billion and 150,000 workers in 24 countries.

 

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