Andy Morton

US: Anheuser-Busch InBev call option concession "not enough" for DoJ - analyst

By | 5 February 2013

A-B InBev is looking to buy Grupo Modelo

A-B InBev is looking to buy Grupo Modelo

Anheuser-Busch InBev's offer to forgo a 10-year call option in its Grupo Modelo takeover has been rejected by the Department of Justice, an analyst has claimed.

The concession failed to convince the DoJ to drop its threatened court case against A-B InBev over the proposed acquisition of Modelo, Stifel analyst Mark Schwartzberg suggested in a note today (5 February). The DoJ says the deal, announced in June, could see consumers pay more for beer.

The US$20.1bn purchase would also see Constellation take full control of Crown Imports, the US sales and distribution JV it operates with Modelo. However, the call option allows A-B InBev, after ten years, to bid for 100% of Crown. 

“We believe A-B InBev offered to eliminate its proposed ten-year call to buy Crown from Constellation and that the DOJ said 'not enough',” Stifel said.

A-B InBev may also have offered to sell brands worth about $3bn to satisfy regulators, Stifel said.

“We think this leaves A-B InBev in the position of litigating or offering additional remediation,” the analyst said.

A-B InBev could further soothe regulatory fears by weakening its US market position and “actually or effectively” selling Constellation the US rights to Modelo brands, Stifel said. This would damage A-B InBev's value but not by as much as it expects to gain from the Modelo deal, the analyst added.

Constellation has taken aim at the DoJ's lawsuit, accusing it last week of having an “incomplete understanding” of the proposed takeover of Mexico's Modelo.

Expert analysis

Global Beer Tax Tables, 2012

This report covers 58 markets and comprises a series of tables covering taxation base, historical excise rates, legal controls and a calculation of the total taxation burden on beer.

Sectors: Mergers & acquisitions, Spirits

Companies: InBev, Modelo, Constellation

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US: Anheuser-Busch InBev call option concession "not enough" for DoJ - analyst

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