US: Anheuser-Busch InBev, Modelo deal still alive - analyst
The deal will still happen, one analyst predicts
The deal was thrown into doubt yesterday (31 January) when the US Department of Justice (DoJ) filed an anti-trust lawsuit against the transaction. The DoJ has concerns that the tie-up will lessen choice in the US beer market and force up prices.
However, analysts remain hopeful the deal will go through. UBS said in a note today (1 February): “We still believe a deal will happen, but completion is likely to be delayed beyond Q1 2013 and may require concessions.” The firm suggested that A-B InBev will have to give up its call option, which would allow it, after ten years, to bid for 100% of Crown Imports. UBS also believes that A-B InBev is “willing to offer reasonable concessions”.
However, Nomura analysts said that the DoJ's logic “looks quite sound”. The concern is that “a Modelo fully owned and controlled by A-B InBev would be able to increase beer prices to American consumers”, Nomura noted.
On potential timings for the deal to still happen, it added: “At the very least, there is significant risk of slippage on the deal over several quarters, which is set to lead to lower FY13 consensus estimates.”
But the DoJ's filing appears to rule out a “wider industry review” around the current level of consolidation in the US beer industry, Nomura noted.
On Constellation Brands meanwhile, UBS said concessions by A-B InBev are likely to fall in favour of the Califorina wine and spirits group's. “Should the deal not happen, it may be difficult for Modelo to buy back the business from STZ,” UBS added.
Shares in A-B InBev are currently up by 3.35% at EUR66.04 on the Brussels exchange. Constellation Brands shares recovered slightly yesterday to US$32.36, after initially diving 20% to $31.17.
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