A-B Reaches Agreement With DOJ Over Modelo Deal

WASHINGTON, D.C. -- Anheuser-Busch InBev's move to acquire the remaining stake of Grupo Modelo S.A.B. de C.V. it doesn't already own is inching closer to becoming a reality. The deal carries a $20.1-billion price tag.

Late Friday, A-B InBev, Grupo Modelo, Constellation Brands Inc. and Crown Imports said they reached an agreement in principle with the U.S. Department of Justice (DOJ) on a proposed resolution to the department's legal action challenging the proposed acquisition. The resolution on the table is substantially in line with the revised transaction announced on Feb.14.

Under terms of the revised agreement, once the transaction is complete, A-B InBev would immediately divest its full U.S. Grupo Modelo interest -- known for the Corona and Modelo brands -- for $2.9 billion. Victor, N.Y.-based Constellation Brands would acquire all U.S. Grupo Modelo assets. A-B InBev also said it would sell Compania Cervecera de Coahuila, Grupo Modelo's brewery in Piedras Negras, Mexico.

Chicago-based Crown Imports is a joint venture between Grupo Modelo S.A. de C.V. and Constellation Brands.

In connection with the latest agreement, the parties and the DOJ have jointly approached the court and requested an extension of the stay of the proceedings until April 23. This stay will allow the parties to finalize the details of a proposed consent judgment and the related definitive agreements and papers required for settlement.

The parties stated in their filing with the court that they expect for this to be their final request to extend the stay. Approval of the transaction, and the timing of such action, remains subject to the finalization of the relevant documentation with the DOJ and other parties, and approval by the court.

The revised transaction with Constellation remains subject to regulatory approval in Mexico.

The deal made headlines in June. A-B InBev already owns more than a 50-percent stake in the Mexican-based brewer of Corona, Modelo and Pacifico beers. The combined company will have operations in 24 countries, 150,000 employees and estimated revenues of $47 billion, as CSNews Online previously reported.

However, plans ran up against a roadblock in late January when the DOJ filed suit to block the deal in late January. According to the DOJ, if approved, the deal would further expand A-B InBev, the world's largest brewer, by allowing it to take control of Modelo's Corona Extra and Modelo Especial beer brands. It argued that the transaction would hurt competition and raise beer prices for consumers.

In addition, the DOJ stated A-B InBev -- parent of Budweiser -- and Modelo combined would control about 46 percent of the annual U.S. beer market. MillerCoors is second at 29 percent of nationwide sales.