Will Modelos pledge to sell-off its stake in Crown Imports be enough to satisfy US regulators?

Will Modelo's pledge to sell-off its stake in Crown Imports be enough to satisfy US regulators?

Grupo Modelo's plan to sell its stake in Crown Imports might not be enough to satisfy US regulatory authorities examining its merger with Anheuser-Busch InBev and could ultimately scupper its deal with the Belgium brewer, an analyst has said. 

Earlier today, A-B InBev announced it has agreed a deal to buy the remaining stake in Modelo for US$20.1bn. To allow this deal to go through, Modelo has agreed to sell its 50% stake in Crown Imports to Constellation Brands.

This agreement, it has been suggested, is to avoid A-B InBev facing competition issues in the US, otherwise its total distribution in the country would go over 50%. 

But in a note today (29 June), analysts Bernstein Research said this move "may not be enough" to placate the authorities. 

"When InBev bought A-B, the Department of Justice (DoJ) required the disposal of the Labatt brand in the USA and the associated manufacturing contract, which resulted in Molson Coors brewing Labatt on behalf of the new brand owners," the note said. 

"If the DoJ insist on a similar remedy, this could imply the sale of the US brand rights to Constellation and a new manufacturing solution." 

This could mean the disposal of a Mexican brewery to Constellation or a third party, or theoretically CCM/Heineken could end up brewing Corona and the other brands destined for the US, the note said. 

It added:  "Clearly an extreme solution such as this could necessitate the renegotiation of the deal and might even be a deal-breaker."