Anheuser-Busch InBev has reached a final agreement with the U.S. Department of Justice that could settle a dispute over its $20.1 billion acquisition of the Mexican brewer Grupo Modelo.
The world's largest brewer has been trying since June to buy the half of Grupo Modelo that it doesn't already own. The Justice Department sued to block the deal out of concern that a company that massive would stifle competition in the U.S.
The companies involved in a complicated series of deals surrounding the acquisition have negotiated for months with Justice officials to try and clear the way. They submitted an agreement Friday to the court and if approved, it is expected to close in June.
AB InBev originally sought to get access to all of Modelo's business U.S. and abroad. But in an effort to appease regulators that blocked the deal, AB InBev later struck a side deal that gives control of the production of Corona and other Modelo beers sold in the U.S. to a competitor, Constellation Brands Inc.
The agreement announced Friday is similar to the modified deal, but instead requires the sale of Modelo's entire U.S. business to Constellation.
That would give Constellation not just the licenses of Modelo brand beers in the U.S., but also brewing capabilities so that it is not relying on AB InBev at all. The agreement also requires the sale of AB InBev's stake in a joint venture agreement and other assets, rights and interests so that Constellation can compete in the U.S. beer market independent of AB InBev.
"This is a win for the $80 billion U.S. beer market and consumers," said Bill Baer, assistant attorney general in charge of the DOJ's antitrust division. "If this settlement makes just a one percent difference in prices, U.S. consumers will save almost $1 billion a year."
Baer said the deal as originally presented was potentially transformative in a bad way for consumers, but this agreement creates an independent owner of Modelo brands in the U.S. that will be positioned to provide consumers with more brands at competitive prices.
Constellation will effectively replace Modelo as a competitor in the U.S. selling its Corona and other brands domestically.
The company, based in Victor, N.Y., expects the deal will double its sales and solidify its place in the U.S. beer market.
The settlement also will benefit AB InBev, based in Belgium, which will still add Modelo brands globally to its already expansive portfolio of beers that includes Budweiser, Stella Artois and others.
The beer industry has always been fiercely competitive, but brewers have come under incredible pressure since the global downturn.
Unemployment hit young men more than other populations and that took a toll on sales, as they represent beer maker's key market.
Domestic beer production, a key indicator of market activity, increased 1 percent in 2012 after falling for three straight years, according to industry group the Beer Institute. Production hit nearly 194 billion barrels in 2012 but that is still down more than 4 percent from 198.4 billion barrels produced in 2007.
Anheuser-Busch earlier this year said profits fell nearly 5 percent in the final quarter of 2012, and it forecast weak first-quarter sales for this year. The company posts results for the current quarter at the end of the month.
Shares of AB InBev rose $1.65, or 1.7 percent, to close at $99.22 Friday. Constellation Brands shares increased $1.18, or 2.5 percent, to close at $48.52.
- Consumer Discretionary
- Mergers, Acquisitions & Takeovers
- Grupo Modelo