The attempt by the makers of Schmidt beer to buy a major interest in the brewers of rival brand Schaefer was blocked yesterday by a federal judge in New York.
Judge Vincent L. Broderick issued a preliminary injunction blocking C. Schmidt & Sons Inc. of Philadelphia from buying stock in F. & M. Schaefer Corp. of New York.
Broderick ruled that if Schmidt carried out its plan to buy 29 percent of Schaefer, "competition between breweries which are effectively competing today would be eliminated."
The injunction was issued in a lawsuit filed by Schaefer against Schmidt and Citibank, which controlled the block of Schaefer stock Schmidt planned to buy.
Schmidt can appeal the preliminary ruling immediately, wait for a trial on a permanent injunction, or drop its attempt to buy into Schaeffer. There was no immediate reaction from Schmidt officials.
Both companies are regional brewers.
Schaefer contended the purchase of its stock by the rival company would violate antitrust laws by reducing competition.
Schmidt had claimed the deal was exempt from antitrust barriers under the "failing company" doctrine, but Judge Broderick ruled there was no evidence Schaefer would go out of business if the merger were dropped.
In addition to its antitrust implications, the takeover bid drew attention because Schmidt was trying to finance the purchase with only $250,000 of its own money and had made an agreement with Citibank to buy stock worth $20 million on the open market from the bank for only $6 million.