11:38 a.m. | Updated
LONDON – Anheuser-Busch InBev moved on Thursday to rescue its $20.1 billion proposed takeover of Grupo Modelo of Mexico, the maker of Corona beer, by making concessions aimed at persuading American antitrust authorities to let the deal proceed.
Under the revised terms, Anheuser-Busch InBev offered to sell the rights to Corona and other Grupo Modelo brands in the United States to Constellation Brands, the world’s largest wine company, for $2.9 billion.
The agreement also would include the sale of a brewery close to the United States-Mexico border currently owned by Grupo Modelo, as well as the perpetual licensing rights to Grupo Modelo’s brands in the United States. If the revised deal goes through, Anheuser-Busch InBev will gain greater access to emerging markets like Mexico.
Anheuser-Busch InBev’s decision to sell Compañía Cervecera de Coahuila, the Mexican brewery that produces Corona, Corona Light and Modelo Especial, is an effort to satisfy regulators after the Justice Department sued last month to block the deal.
United States authorities had said the original merger proposal would increase Anheuser-Busch InBev’s control of the American beer market, enabling it to raise prices while reducing choice for local consumers.
Grupo Modelo is currently the third-largest beer company in the United States. Anheuser-Busch InBev is the largest, ahead of MillerCoors.
Analysts say that Anheuser-Busch InBev hopes the moves will address the antitrust issues raised by American authorities.
“We decided to restructure the transaction to address the concerns from the Justice Department,” Anheuser-Busch InBev’s chief executive, Carlos Brito, said in an interview with DealBook. “We are focused on getting this to the finish line.”
Mr. Brito declined to comment on the continuing negotiations with the Justice Department.
A Justice Department spokeswoman declined to comment on the company’s efforts to reduce its operations in the United States, though she added that authorities would give any proposal serious consideration. “At the same time, we would continue to prepare for litigation,” she added.
Anheuser-Busch InBev, which is the world’s largest brewing company, was itself created in 2008 through the $52 billion merger of Anheuser-Busch and the Belgian-Brazilian brewer InBev. The proposed $20.1 billion deal for Grupo Modelo would rank as the second-largest takeover in the beer industry after that merger, according to figures from the data provider Thomson Reuters.
In the last five years, Anheuser-Busch InBev also has announced more than 15 additional takeovers, according to the data provider Capital IQ. In a series of multibillion-dollar deals in the beer and liquor sector, a small number of companies like SABMiller and Diageo have gained control over many of top brands.
The move by the Justice Department to block the proposed takeover of Grupo Modelo is the first time in more than a decade that American regulators have tried to slow consolidation in the global beer industry.
The government’s lawsuit, announced last month, quoted internal company documents from Anheuser-Busch InBev to demonstrate that the company’s prices had been undercut by Grupo Modelo. Authorities contend that the proposed deal for Grupo Modelo would eliminate competition from the domestic beer market.
“This is the sort of product that matters to consumers,” William J. Baer, head of the Justice Department’s antitrust division, told reporters on Jan. 31. “If you have a very slight price increase that happens because of this deal, it could mean that consumers will pay billions of dollars more.”
The concessions also maintain Anheuser-Busch InBev’s focus on gaining access to the fast-growing Mexican market, which could help offset a slowdown in more mature markets like the United States and Western Europe.
“The quick settlement is no doubt surprising, but also shows practicality from the Anheuser-Busch InBev side,” Pablo Zuanic, an analyst at Liberum Capital, wrote in a note to investors on Thursday.
Anheuser-Busch InBev also said it had increased its projected annual cost savings from the Grupo Modelo deal by 66 percent, to $1 billion, from estimates provided when the deal was first announced last year. The terms of the original deal for Grupo Modelo remain unchanged, according to a company statement.
The brewing giant’s shares rose more than 6 percent in afternoon trading in Brussels on Thursday, while Constellation Brands’ stock price jumped almost 36 percent in trading in New York on Thursday morning.
For Constellation Brands, the agreement will give it greater access to the American beer market.
As part of the original terms of Anheuser-Busch InBev’s proposed takeover of Grupo Modelo, Constellation had agreed to pay $1.85 billion for the 50 percent stake that it did not already own in Crown Imports, a joint venture with the Mexican brewer.
Constellation would now gain control of the Corona brand across the United States, and plans to invest $400 million in the brewery that is being sold by Grupo Modelo to expand its business in the United States.
“This is a transformational acquisition,” Constellation’s chief executive, Robert S. Sands, said in a statement.
Lazard is advising Anheuser-Busch InBev on the deal, while Morgan Stanley is advising Grupo Modelo.
DealBook: Anheuser-Busch InBev Revises Grupo Modelo Deal
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DealBook: Anheuser-Busch InBev Revises Grupo Modelo Deal
