The Justice Department and Anheuser-Busch InBev have agreed to conditions that will allow the beer giant to expand its stake in Mexico’s Grupo Modelo, according to court documents and company statements issued Friday.
The pact would settle a lawsuit filed by Justice on Jan. 31 aimed at stopping AB InBev, the world’s largest brewer with about 200 brands, from buying the 50 percent of Modelo it does not already own for $20.1 billion.
The agreement requires the sale of Corona and other Modelo brand beers for the U.S. market to Constellation Brands.
That would give Constellation not just the licenses of Modelo brand beers in the United States but also brewing capabilities so that it is not relying on AB InBev at all.
The agreement announced Friday closely tracks a February revision of the transaction to meet U.S. antitrust objections. AB InBev knew early on that Justice would balk at allowing it to expand its already large U.S. presence.
U.S. wine giant Constellation, in addition to the brewery and U.S. brand rights, will also buy AB InBev’s 50 percent share of Modelo’s U.S. distributor, Crown Imports, becoming the third-largest U.S. beer producer after AB InBev and MillerCoors with its $4.75 billion segment of the deal.
The head of Justice’s Antitrust Division, Bill Baer, said Constellation would be a “formidable” rival to AB InBev and thus prevent price increases to consumers.
But AB InBev comes out a winner because it will sell Corona and other Modelo brand beers in Mexico, the world’s fourth-largest market in terms of profit generated, and elsewhere outside the United States, which was the company’s original goal.
“This is a positive step in the right direction for ABI,” said Jefferies analyst Dirk Van Vlaanderen in a note estimating that the Modelo buy would add 10 percent to earnings.
AB InBev jumped as much 1.9 percent on news of the agreement before closing in Brussels at 75.60 euros a share, up 1.5 percent. Constellation stock surged 2.5 percent to $48.52 in New York.
The agreement adds Victor, N.Y.-based Constellation as a defendant to the case, binding the company to the terms of the deal and allowing the government and the court to continue oversight.
Constellation Brands chief executive Rob Sands said that buying the rest of Modelo distributor Crown represented “a significant milestone for Constellation as the most transformational event in the history of our 68-year-old company.”