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Budweiser sued over bid to buy Grupo Modelo

posted Feb 3, 2013, 4:28 PM by Mexican Beer   [ updated Feb 3, 2013, 4:40 PM ]
U.S. sues to block Budweiser maker's purchase of Grupo Modelo. The $20.1-billion deal would make Anheuser-Busch InBev too big, leading to higher beer prices and less innovation, the Justice Department says. The Justice Department says it's looking out for America's beer drinkers. Officials filed suit Thursday against Anheuser-Busch InBev, the maker of Budweiser, seeking to block its purchase of Mexican beer maker Grupo Modelo, arguing that retail prices of suds would rise if the $20.1-billion deal were finalized.
Last summer, AB InBev, which had a 50% non-controlling stake in Grupo Modelo, maker of Corona Extra, offered to buy the rest of the shares at a 30% premium and had expected the transaction to close early this year. The sale would have merged the largest and third-largest beer makers in the U.S.
In a scathing 27-page complaint, the Justice Department wrote that the deal would have given AB InBev too much market power in the U.S. The beer maker, which has its headquarters in Belgium, had been aggressively competing with Grupo Modelo for market share in states with large Latino populations, such as California and Texas, where Corona is popular.
"The loss of this head-to-head competition would enhance the ability of ABI to unilaterally raise the prices of the brands that it would own post-acquisition, and diminish ABI's incentive to innovate with respect to new brands, products and packing," attorneys for the department wrote. Together, AB InBev and Grupo Modelo account for 46% of beer sales in the U.S., according to the Justice Department.
"We took this action today because we believe the acquisition is a bad deal for American consumers," Bill Baer, assistant attorney general in charge of the antitrust division, said in a conference call with reporters.
The lawsuit was filed despite an offer by AB InBev to sell its 50% stake in Crown Imports, which along with Constellation Brands Inc. imports and markets Modelo beers in the U.S.
They "went as far as to mimic Corona's distinctive clear bottle," according to the lawsuit. "Ultimately, instead of trying to compete head-to-head with its own product, Bud Light Lime, [AB InBev] is thwarting competition by buying Modelo."
Shares of the companies involved slid Thursday after the lawsuit was filed, but the hardest hit was Constellation, which had agreed to buy AB InBev's stake in Crown Imports. That firm's shares plunged $6.81, or 17.4%, to $32.36.
AB InBev fell $5.54, or 5.9%, to $88.60.

Find the complete source of this post here...   Credits 100% Richardo Lopez - LA Times