NEW YORK/WASHINGTON- Anheuser-Busch InBev SA (ABI.BR), Grupo Modelo (GMODELOC.MX) and Constellation Brands Inc (STZ.N) are discussing ways to address U.S. regulators' antitrust concerns over their mega-merger and expect to soon open settlement talks to avoid a trial, a source close to one of the companies said on Friday.
The U.S. Department of Justice said on Thursday it was suing to block AB InBev, the world's biggest beer maker, from buying the half of Mexico's Modelo it does not already own for $20.1 billion, saying the combination would hinder competition and lead to higher beer prices.
Anticipating such a move, the deal includes the sale of Modelo's half of U.S. distributor Crown Imports to its partner, Constellation, for $1.85 billion, which the companies say strips AB InBev of any control over Modelo beers, including Corona, in the United States, the world's most profitable beer market.
That was not enough for the DOJ and now the parties are headed to court for a trial that could drag on for months. But one source, who declined to be named, said the companies are also pursuing "a parallel path" toward a possible settlement.
Officials for AB InBev, Constellation and Modelo declined to comment. The DOJ was not immediately available.
Also on Friday, Constellation, the world's biggest branded wine maker, said the DOJ's complaint "demonstrates its incomplete understanding of the proposed transaction."
The DOJ has "overlooked the existence and commercial activities" of Crown Imports, Constellation said. It claims that the deal will actually improve competition since the distributor would be completely independent from the supplier, whereas now, Modelo has an ownership stake.
AB InBev, itself formed by the biggest cash takeover ever, has said it plans to fight the DOJ in what promises to be a high-profile showdown. Christine Varney, a former chief of the Justice Department's Antitrust Division, has been a lead lawyer for Modelo.
"We have a terrific team of people who worked up this case and are going to be involved in litigating it," said Bill Baer, head of the Justice Department's Antitrust Division on Thursday.
Meanwhile, another source close to the deal expressed confidence that it will close.
"Courts are funny things but ... I prefer our side of the case to their side, I'll tell you that," the source said.
"It's a high-stakes game of poker to some extent," added a banker who is not directly involved.
Constellation shares closed up 32 cents at $32.68 on the New York Stock Exchange. AB InBev shares closed up 4 percent at 66.57 euros in Brussels.