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Constellation defends AB InBev-Modelo deal

NEW YORK (AP) -- Constellation Brands is defending a proposed deal between beer giants Anheuser-Busch InBev and Grupo Modelo, saying it would increase competition in the U.S. by giving Constellation greater control over Corona and other brands.

The statement was in response to an antitrust lawsuit filed by the Justice Department Thursday that said AB InBev's proposal to buy Grupo Modelo would reduce competition by bringing two of the most popular brands — Budweiser and Corona — under one owner. That would lead to higher prices for Americans, the Justice Department said.

Although Grupo Modelo owns Corona and other brands, those beers are distributed in the U.S. through a joint venture between Modelo and Constellation called Crown Imports. To address antitrust concerns over its deal with AB InBev, Modelo had planned to sell its half of Crown Imports to Constellation.

In a statement Friday, Constellation said its deal to buy the other half of Crown would "enhance Crown's status as an independent and competitive entity."

"Our Crown team independently develops implements and refines pricing, promotional and sales strategies for each of our brands in the U.S.," Crown president Bill Hackett said in a statement.

In its suit, however, the Justice Department called the sale of Crown to Constellation an "attempt to fix this anticompetitive deal" with a "temporary supply agreement." The Justice Department noted that AB InBev could terminate its deal to supply Modelo beers to Crown after 10 years, after which it would retain control of Corona and other brands in the U.S.

Following the lawsuit, Goldman Sachs analyst Judy Hong lowered her rating on Constellation to "Neutral" from "America's Buy List," citing the diminished chances of the deal going through. Although Hong noted that it could still happen, she lowered her probability to 50 percent, from 75 percent.

According to court papers filed in the case, the government said AB InBev 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.

By pricing aggressively, Modelo — through its importer, Crown Imports — puts pressure on AB InBev to maintain or lower prices, the government said.

Shares of Constellation were up 2 percent at $32.98. Shares of Anheuser-Busch were up 2 percent at $90.33.