Constellation Seeks OK to Back AB InBev in Antitrust SuitTom Schoenberg
Constellation Brands Inc., seeking to support Anheuser-Busch InBev NV’s bid to buy Grupo Modelo SAB, asked a judge to intervene in the U.S. lawsuit filed to block the deal.
Constellation, which jointly owns a U.S. beer distributor with Modelo, said in a filing yesterday in federal court in Washington that it should be allowed to support the deal in the proceedings. If the $20.1 billion acquisition is approved, Victor, New York-based Constellation would end up with Modelo’s stake in the distributor, Crown Imports LLC, along with a 10-year distribution agreement for brands including Corona.
“The acquisition of Modelo’s 50 percent interest in Crown is a transformational transaction for Constellation’s beer business,” Margaret Warner, a lawyer for Constellation, wrote in the filing. “The transaction will double Constellation’s participation in the beer business.”
Constellation, which said it had been part of negotiations with the Justice Department before the government’s antitrust case was filed, wasn’t named as a defendant in the lawsuit. Constellation and Crown, half of which is owned by Constellation, would get to argue for their own stake in the deal and “have a seat at any potential settlement table” if the judge allows them to intervene, the company said in court papers.
AB InBev Request
AB InBev, based in Leuven, Belgium, asked U.S. District Judge Richard Roberts in its own filing yesterday to let Constellation and Crown join the case. The Justice Department opposes the move, the companies said.
In a separate filing, the Justice Department and AB InBev asked Roberts to set a hearing for Feb. 15 to schedule how the case should proceed.
Gina Talamona, a Justice Department spokeswoman, declined to comment on yesterday’s filings.
“It seems likely a judge is going to grant this,” said Allen Grunes, an antitrust lawyer with Brownstein Hyatt Farber Schreck LLP in Washington who isn’t involved in the case. “The Justice Department has put the adequacy of the supply agreement and transfer of ownership of the distributor to Constellation at issue in their complaint.”
Constellation agreed to pay $1.85 billion for Modelo’s stake in Crown Imports, the two companies’ joint venture for U.S. distribution. That deal, which would give Constellation the exclusive right to import Modelo beer into the U.S. for 10 years, is contingent upon AB InBev buying Modelo.
Before the lawsuit was filed on Jan. 31, negotiations with the Justice Department filing centered on how to structure a long-term supply and pricing agreement for importing Modelo’s brands to the U.S., three people familiar with the matter said Jan. 15. The talks subsequently broadened to include production assets, one of the people said.
The lawsuit alleges the Constellation deal was aimed at winning regulatory approval by “creating a facade of competition” between AB InBev and its importer.
Constellation “would acquire no Modelo brands or brewing facilities under this arrangement -- it remains simply an importer, required to depend on ABI for its supply of Modelo-branded beer,” the department said in the complaint.
The department’s action “fundamentally threatens Constellation’s future in the beer business,” according to the company’s filing.
Crown Imports, which had $2.39 billion in sales for the year ending Feb. 29, 2012, according to the company, is AB InBev’s primary competitor in the U.S., not Modelo, Constellation said in a statement. Also, the company’s full ownership of Crown will improve competition and give Crown “greater flexibility in responding to competitive factors in each of its markets,” Constellation said.
The case is U.S. v. Anheuser-Busch InBev SA/NV, 13-cv-00127, U.S. District Court, District of Columbia (Washington).