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DSM Local

Ankeny, IA

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#1
Jan 31, 2013
 
By BRENT KENDALL And VALERIE BAUERLEIN
The U.S. government sued to block the world's biggest beer maker from spending $20 billion to get even bigger, the latest deal to fall prey to global antitrust regulators.

The surprise lawsuit seeks to block Bud Light maker Anheuser-Busch InBev NV's ABI.BT -7.79%deal with the Mexican company that owns the Corona brand, and comes just a day after concession talks with the government broke down.

U.S. authorities said they want to prevent any overcharging by the global giants that dominate mass-market brews.

Defenders of the companies said U.S. consumers have plenty of choice. Belgium-based AB InBev said the government's action was "inconsistent with the law, the facts and the reality of the marketplace."

Beer specialists were divided on whether the merger could survive, with some speculating that AB InBev could relinquish further control over Corona sales in the U.S. to assuage concerns about pricing dominance.

The suit caused a sharp drop in shares of AB InBev and its would-be merger partner, Grupo Modelo GMODELO.MX -6.76%SAB of Mexico. It hit shares of Constellation Brands Inc. STZ -17.39%even harder because the wine and spirits producer was set to expand as part of a side deal in the merger.

Regulators have taken a hard line on some recent deals. The Justice Department in 2011 forced AT&T Inc. T +0.90%to drop its acquisition of rival cellphone provider T-Mobile USA, while European regulators blocked the merger of Deutsche Börse AG DB1.XE -1.04%and NYSE Euronext NYX +0.38%last year. In January, United Parcel Service Inc. UPS -2.39%abandoned its bid for Dutch delivery company TNT Express NV TNTE.AE +1.93%after European objections.

The U.S. beer industry is largely controlled by two big players: AB InBev, owner of Bud Light and Budweiser, and MillerCoors, maker of the Coors Light brand. Modelo, whose Corona is the best-selling imported beer in the U.S., runs a distant third, with 7% of U.S. beer sales, according to the Justice Department. Together, AB InBev and Modelo would control about 46% of U.S. sales.

The Justice Department's 27-page lawsuit, filed in a Washington, D.C., federal court, portrayed Modelo as an important competitor that puts pressure on AB InBev to maintain or lower prices, especially in California, New York, Texas and some other markets. AB InBev has complained in internal strategy documents about pressure from Modelo's pricing tactics, the department said.

The department said that when AB InBev raises beer prices, MillerCoors usually follows followed suit, while Modelo has been resistant. AB InBev internal documents "show that it is increasingly worried about the threat of high-end brands, such as Modelo's, constraining its ability to increase…pricing," the lawsuit said.

The lawsuit sets the stage for a major court fight unless the sides can find a way to resolve their differences. "We intend to vigorously contest the DOJ's action in federal court," AB InBev said. Grupo Modelo issued a comment echoing AB InBev.
DSM Local

Ankeny, IA

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#2
Jan 31, 2013
 
Should the acquisition agreement fall apart as a result of the antitrust challenge, AB InBev may have to pay Modelo a $650 million breakup fee, according to the agreement struck in June.

Some industry watchers scoffed at the U.S. government's logic, saying supermarket shoppers and bar hoppers can choose from a wide variety of beers. "Are you going to tell me because they increase the price of Corona there aren't other beers you can buy as a substitute?" said Jeffrey Golman, vice chairman of Mesirow Financial and head of investment banking at the Chicago bank. "It seems like an overreach."

But Stephen Axinn, an antitrust lawyer with Axinn Veltrop & Harkrider LLP, said the government made a strong initial showing.

"The fact is you may have 50 different brands of beer on the shelf, but they're only coming from a few sources," Mr. Axinn said. He said that for AB InBev to win the case, it would have to demonstrate that the deal isn't likely to give it enhanced pricing power. Given the internal company documents cited by the Justice Department, "that might be a difficult thing to do," he said.

AB InBev made the deal for Grupo Modelo last summer, hoping to augment its position in the fast-growing Mexican market while expanding the reach of Modelo brands globally. AB InBev already owns a 50% economic stake in Modelo but controls fewer than half of the voting shares. It proposed to get full control by buying the rest of Modelo from the Mexican families that control it.

The companies had hopes for approvals because the Justice Department gave its blessing to two large beer deals in 2008. It allowed the combinations of Anheuser-Busch and InBev, maker of Stella Artois and Beck's, after finding the two companies engaged in little head-to-head competition in the U.S. The department also cleared a joint venture that combined the U.S. operations of SABMiller SAB.LN +1.32%and Molson Coors Brewing Co. TAP -0.90%
And Grupo Modelo made a further arrangement to address antitrust concerns. It said it would sell its half stake in a U.S. distributor that imports and markets Corona in the U.S. That distributor was to become wholly owned by Constellation Brands, meaning that the price of a Corona Extra in the U.S. would be decided separately from the price of a Bud Light.

But the Justice Department didn't buy it, saying the arrangement would preserve only a "façade" of competition because Constellation would still rely on AB InBev for its beer supply.

AB InBev and the Justice Department were in active negotiations to resolve their differences as recently as Wednesday night, said one person briefed on the matter. Taking some in the AB InBev camp by surprise, the government then pulled the plug, this person said. The sides were "just too far apart," said the department's antitrust chief, Bill Baer.

Some beer-market watchers said AB InBev could offer additional concessions, perhaps giving up or restructuring its 10-year option to buy the U.S. rights for all Modelo brands from Constellation's Crown subsidiary.

"If they would make that clause go away, it would give Crown more stability," said Joe Thompson, president of Independent Beverage Group in Hilton Head, S.C. "You could have a very viable competitor, even a third major U.S. supplier."

He said AB InBev could also be pushed to sell a big brewery to Crown to give it production capacity.

Others said a settlement may be hard to come by, especially given that earlier negotiations faltered.

"There is no simple solution and this is for a lot of marbles," said Benj Steinman, publisher of Beer Marketer's Insights, a trade publication. "You've seen a lot of speculation on concessions, everything from breweries to brand, but it's not clear what parameters [DOJ] would even consider."

http://online.wsj.com/article/SB1000142412788...
Amused Slew

Minneapolis, MN

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#3
Jan 31, 2013
 
Isn't this Budweiser? That is the beer that Obama had at his beer summit after the racist Prof in MA called the cop all kinds of ugly names. That means that Obama will approve the merger because this beer is too big to fail.
DSM Local

Ankeny, IA

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#4
Jan 31, 2013
 

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Amused Slew wrote:
Isn't this Budweiser? That is the beer that Obama had at his beer summit after the racist Prof in MA called the cop all kinds of ugly names. That means that Obama will approve the merger because this beer is too big to fail.
Free markets & Free Labor, approval shouldn't be required.
ist

Duluth, MN

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#5
Jan 31, 2013
 

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Most of their brews are cheap swill anyway. Find a small local brewery and stop drinking beer flavored water like Budweiser and the like.
Amused Slew

Minneapolis, MN

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#6
Jan 31, 2013
 

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DSM Local wrote:
<quoted text>
Free markets & Free Labor, approval shouldn't be required.
You are right. But this is Barry's America now. You can't do anything without The Chosen One saying it is Okie Dokie.
DSM Local

Ankeny, IA

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#7
Jan 31, 2013
 

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ist wrote:
Most of their brews are cheap swill anyway. Find a small local brewery and stop drinking beer flavored water like Budweiser and the like.
as long as it's strong
Amused Slew

Seattle, WA

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#8
Jan 31, 2013
 

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Amused Slew wrote:
<quoted text>
You are right. But this is Barry's America now. You can't do anything without The Chosen One saying it is Okie Dokie.
Take a pink pill, along with the blue ones, you're getting "agitated" and spewing nonsense.... always cantgetitup....
Amused Slew

Minneapolis, MN

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#9
Jan 31, 2013
 

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Amused Slew wrote:
<quoted text>Take a pink pill, along with the blue ones, you're getting "agitated" and spewing nonsense.... always cantgetitup....
No one knows their drugs like my Slewsie. You are always so helpful.
Iowan

West Des Moines, IA

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#11
Feb 2, 2013
 
Why do republicans want to make beer more expensive? This merger is bad and should be stopped. No to Monopoly!
Amused Slew

Minneapolis, MN

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#12
Feb 2, 2013
 
Iowan wrote:
Why do republicans want to make beer more expensive? This merger is bad and should be stopped. No to Monopoly!
Why not just have the state declare all private companies are now owned by the government. Then we can have the "right people" running those companies. The profits can be funneled into charitable causes to help the poor instead of making the rich richer. And we won't ever have to worrry about the cost of beer going up again. Win-win. Right Leftie?
Iowan

West Des Moines, IA

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#13
Feb 2, 2013
 
Amused Slew wrote:
<quoted text>
Why not just have the state declare all private companies are now owned by the government. Then we can have the "right people" running those companies. The profits can be funneled into charitable causes to help the poor instead of making the rich richer. And we won't ever have to worrry about the cost of beer going up again. Win-win. Right Leftie?
No but with all the beer mergers a public option to compete with the privates maybe a viable solution to help lower the cost, after all competition is a good thing, Right righty?
Amused Slew

Minneapolis, MN

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#14
Feb 2, 2013
 
Iowan wrote:
<quoted text>
No but with all the beer mergers a public option to compete with the privates maybe a viable solution to help lower the cost, after all competition is a good thing, Right righty?
Absolutely. No one is able to keep private companies honest like a government owned company competing against it. You must have earned your MBA from the Moscow School of Business. Only the best of the best get in there.
Iowan

West Des Moines, IA

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#15
Feb 2, 2013
 
Amused Slew wrote:
<quoted text>
Absolutely. No one is able to keep private companies honest like a government owned company competing against it. You must have earned your MBA from the Moscow School of Business. Only the best of the best get in there.
I'm sure the best of the best do get in there. Why do you not like russians are you a crazy like DSM Loco? Why do you believe a government option wouldn't work?
Amused Slew

Minneapolis, MN

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#16
Feb 2, 2013
 
Iowan wrote:
<quoted text>
I'm sure the best of the best do get in there. Why do you not like russians are you a crazy like DSM Loco? Why do you believe a government option wouldn't work?
Dumbass. Didn't I say you got your MBA at the place where the best of the best got theirs? And I absolutely agree that there is nothing better than a government owned company competing against the private sector to give you the best of both worlds. An example might be the US Postal Service. Right?
Iowan

West Des Moines, IA

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#17
Feb 2, 2013
 
Amused Slew wrote:
<quoted text>
Dumbass. Didn't I say you got your MBA at the place where the best of the best got theirs? And I absolutely agree that there is nothing better than a government owned company competing against the private sector to give you the best of both worlds. An example might be the US Postal Service. Right?
the post office provides good service what is your issue
Amused Slew

Minneapolis, MN

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#18
Feb 2, 2013
 
Iowan wrote:
<quoted text>
the post office provides good service what is your issue
They sure do. In fact I just read about how the Post Office just delivered a letter to someone that was mailed over 50 years ago. that is dedication, right? They have plenty of employees who are top notch. They even have a phrase coined about their wonderful employees. "Going Postal." I do have to say they were smart enough to fire my gay Slewsie. That is another positive. Oh, yeah. Almost forgot. They are very efficient and profitable. They are a great example of what all private companies should strive to be.
Iowan

West Des Moines, IA

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#19
Feb 2, 2013
 
Amused Slew wrote:
<quoted text>
They sure do. In fact I just read about how the Post Office just delivered a letter to someone that was mailed over 50 years ago. that is dedication, right? They have plenty of employees who are top notch. They even have a phrase coined about their wonderful employees. "Going Postal." I do have to say they were smart enough to fire my gay Slewsie. That is another positive. Oh, yeah. Almost forgot. They are very efficient and profitable. They are a great example of what all private companies should strive to be.
Of course they are they provide a good service at a cheap price, they care for the consumer. They care for their workers looks at the unions

I'd love to follow this up another day but the library is closing and I have a lot of shifts coming up at the gas station so it might be a while (because of republicans we need a better bus service, they are anti-lightrail as well here; man europe does great with theirs and so does NYC stupid righties)
Amused Slew

Minneapolis, MN

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#20
Feb 2, 2013
 
Iowan wrote:
<quoted text>
Of course they are they provide a good service at a cheap price, they care for the consumer. They care for their workers looks at the unions
I'd love to follow this up another day but the library is closing and I have a lot of shifts coming up at the gas station so it might be a while (because of republicans we need a better bus service, they are anti-lightrail as well here; man europe does great with theirs and so does NYC stupid righties)
You are the type of guy that I hoope to be when I grow up. Smart, successful, authoritative, and a rock among men. Good luck at the gas station tonight. I will look forward to the next time you can get to the library and teach all of us a lesson again. All hail King Obama!
Amused Slew

Seattle, WA

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#21
Feb 2, 2013
 
You hoope ?? Probably.... You grow up, nope just out...

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