Comment - Wehring's Way: Anheuser-Busch InBev and Grupo Modelo: Your Options Are...
At first glance, the impasse where Anheuser-Busch InBev and the US Department of Justice are currently resting appears to have three roads down the mountain.
Option one is that the Department of Justice 'loses' the court case. Much as this would not be a toll-free road to take for A-B InBev – think of the court costs – this would be the perfect conclusion for the brewer, which would then be allowed to proceed as it initially intended.
But, life just isn't that kind, really, is it?
The second option is that A-B InBev 'loses'. If that should happen – let's call that 'The Doomsday Scenario', for dramatic effect – it would be back to the drawing board for a company.
And, even if it did have to pay the US$650m break penalty it agreed with Modelo, it would still have heavy pockets: One analyst has calculated that the brewer has raised around $14bn from bond issues to fund the transaction.
The final – and most likely – path would see A-B InBev making concessions to the DoJ that would allow the acquisition to proceed. The most obvious concession is A-B InBev's call option, which would allow it, after ten years, to bid for 100% of what would be Constellation Brand's Crown Imports unit, the US sales and distribution vehicle for Modelo's brands. (An aside: This call option was kept pretty quiet when the acquisition was agreed between A-B InBev and Modelo last year).
Dropping this in favour of a perpetual deal with Crown ought to be enough for the DoJ. It had better be – I don't see A-B InBev being too keen on selling any breweries to smooth the path.
A question, though: If, as one would expect, A-B InBev has been talking to the DoJ for some time about this, why haven't these concessions already been reached?
Whisper it, but is this the Department of Justice using the high profile of the brewer of Budweiser to flag up its pro-consumer credentials?
And, while I'm in a question-asking mood, allow me to proffer this: Is it more important for A-B InBev to have control of Modelo's brands for their future global potential or for their current US presence?
Corona may be the biggest imported beer in the US, but hassle like this might well have A-B InBev's exec team considering the beer's broader potential elsewhere.
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