* Illinois blocks Anheuser takeover bid of distributor
* Cites "three tier" system
* Anheuser says to challenge ruling in federal court
(Adds comments from Anheuser, trade publication, byline)
By Martinne Geller
NEW YORK, March 10 The Illinois Liquor Control
Commission blocked a bid by Anheuser-Busch InBev NV's (ABI.BR)
U.S. business to take over Chicago-area distributor City
In a declaratory ruling on Wednesday, the commission said
that Anheuser-Busch Cos Inc, part of Belgium-based
Anheuser-Busch InBev, is a "nonresident dealer" of alcoholic
beverages and that the Liquor Control Act does not specifically
allow a nonresident dealer to also be a distributor in the
The commission's ruling cites Illinois' "three tier"
distribution system, which requires alcoholic beverages in U.S.
states to be sold to a wholesaler or distributor, which then
sells them to stores, bars or restaurants.
Anheuser-Busch InBev, the world's largest brewer with
brands ranging from Budweiser to Stella Artois, said in a
statement that it strongly disagrees with the decision, and
that it is pursuing other legal options, including filing a
lawsuit on Wednesday in federal court in Chicago to challenge
the constitutionality of the decision.
The commission said preserving the three tier system is "a
fundamental objective" of the state legislature as a matter of
public policy and that it "protects against vertical monopolies
and economies of scale that would lead to the introduction of
cheap alcoholic liquor into the marketplace".
Anheuser-Busch General Counsel Gary Rutledge said "a brewer
holding a (distribution) license is no threat to the three-tier
system whatsoever, and any statement otherwise is simply a
misunderstanding of the three-tier system."
He said the commission's position is that Illinois law
allows in-state brewers to hold distribution licenses, just not
Anheuser-Busch, through its affiliate Wholesaler Equity
Development Corp, proposed to buy the 70 percent stake in City
Beverage that it does not already own. It has held a 30 percent
interest in the distributor since 2005.
Because Anheuser has had the stake since 2005, the
commission said it would renew City Beverage's current
distribution licenses upon their expiration.
Yet if the commission learns that Anheuser or any of its
affiliates has bought any additional stake in City Beverage, it
will then consider the licenses to be in violation of the
liquor control act and subject to revocation or refused
renewal, the ruling said.
Beer Business Daily publisher Harry Schuhmacher said it was
"kind of a split ruling".
"AB can't own a controlling interest, but it can own a 30
percent interest," Schuhmacher wrote on Wednesday. "It leaves a
hole in the boat, as they say."
(Reporting by Martinne Geller; editing by Gerald E.
McCormick, Andre Grenon and Carol Bishopric)