Obama administration intervenes in beer merger

The Obama administration is seeking to stop a binational business merger of Anheuser-Busch InBev (ABI-BR), which brews Budweiser Beer, and Grupo Modelo (GCMODELOCO) - the Mexican Brewer that produces the Corona and Negra Modelo labels. ABI is venturing $20.1billion (£12.7billion) in the deal. ABI seeks to purchase the half of Modelo that it does not already own.

 
The Justice Department has filed a lawsuit in federal court in Washington DC to pre-empt the capitalist marriage, contending that the merger would bring together 46% of the $80 billion of annual beer sales in the United States, too big a share it contends. The Obama administration is arguing that the merger would diminish competition and thus cause prices for the amber liquid to rise.
 
"If ABI fully owned and controlled Modelo, ABI would be able to increase beer prices to American consumers," said assistant attorney general Bill Baer. He added, "This lawsuit seeks to prevent ABI from eliminating Modelo as an important competitive force in the beer industry."
 
In response, big brewer ABI said, "We remain confident in our position, and we intend to vigorously contest the Department of Justice's action in federal court."
 
As a result of the DOJ lawsuit, trading in Constellation Brands (STZ.N: Quote), which would have become sole owner of Modelo's Corona distributer, was halted after it dropped 23.8 percent. AB InBev shares dropped as much as 8.0 percent to a three-month low and were the poorest performers in the FTSEurofirst 300 index of leading European stocks. As for Grupo Modelo, its shares dropped to a seven-month low, down 9.5 percent to 105 pesos on the Mexican stock exchange.
 
InBev said in a statement that the Justice Department's decision to sue to stop the deal was "inconsistent with the law, the facts and the reality of the market place."
 
The merger is no longer expected the deal to close in the first quarter. The two companies may settle or decide to void the proposed transaction. 


Spero News editor Martin Barillas is a former US diplomat, who also worked as a democracy advocate and election observer in Latin America. He is also a freelance translator.

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