U.S. challenges deal to merge Budweiser and Corona

On the shelves in Palo Alto, Calif. The proposed $20.1 billion deal would join the top-selling U.S. brewer, Anheuser-Busch InBev, with the Mexican brewer Grupo Modelo, which is No. 3 in U.S. sales.
On the shelves in Palo Alto, Calif. The proposed $20.1 billion deal would join the top-selling U.S. brewer, Anheuser-Busch InBev, with the Mexican brewer Grupo Modelo, which is No. 3 in U.S. sales. (Associated Press)
Posted: February 02, 2013

WASHINGTON - The Justice Department filed a lawsuit Thursday to stop Anheuser-Busch InBev's proposed $20.1 billion purchase of the 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 United States.

In response, ABI 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 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, said ABI would be able to increase beer prices to U.S. consumers if the merger were to go through.

ABI is the largest seller of beer in the United States and Modelo is the third largest. Together, the two firms control about 46 percent of annual sales in this country.

MillerCoors, the second-largest beer company, accounts for 29 percent of nationwide sales.

"What we saw was a pattern of behavior" in which the "big folks were working hard to get price increases, and Modelo was a significant constraint" on that behavior, Baer said in an interview with reporters.

Baer said that in the run-up to Thursday's action, the two sides engaged in "frank and candid discussions," but "at the end of the day, we were just too far apart."

ABI said the government's bid to block the proposed merger was inconsistent with the law, the facts, and "the reality of the market place."

"We remain confident in our position, and we intend to vigorously contest the DOJ's action in federal court," ABI said.

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