WASHINGTON Jan 18 U.S. antitrust regulators are
dissatisfied with proposals made by Anheuser-Busch Inbev SA
in its bid to buy the half of Mexican brewer Grupo
Modelo that it does not already own as it works to
finish its investigation of the deal, a source close to the
talks told Reuters.
The Justice Department's Antitrust Division has shifted into
high gear in recent weeks as it looks at the plan by the world's
largest brewer to buy out Modelo for $20.1 billion.
In hopes of staving off U.S. antitrust scrutiny, AB InBev
agreed to sell Modelo's stake in Crown Imports, its U.S.
distributor, to Constellation Brands Inc for $1.85
This would mean that AB InBev would not distribute, promote
or set the price for Modelo beers like Corona, Negra Modelo and
Pacifico, but it would still supply the beers to Crown.
Antitrust experts had expected the Justice Department to
focus on the supply agreement, but a source said the government
wanted to go further because the sector is so concentrated.
Most of the five antitrust experts polled believed a deal
will be reached, but some felt there was still a chance that the
parties will go to litigation. AB InBev has said the transaction
would close in the first quarter of this year.
Despite a dizzying array of beers on shelves in the United
States, the market is dominated by two big players. AB InBev,
with 47 percent of the U.S. market, has a large stable of brands
from big names like Budweiser and Stella Artois to craft-style
beers like Shock Top and Goose Island.
The No. 2 player is MillerCoors, a joint venture between
SABMiller Plc and Molson Coors Brewing Co, with
a 28.4 percent market share, according to Beer Marketer's
Insights. Like AB InBev, it sells some craft-style beers,
including Blue Moon. Crown is a distant third with 5.3 percent.
U.S. law passed after Prohibition requires that makers of
alcoholic drinks sell their products to wholesalers who
distribute them to retailers.
Antitrust experts knowledgeable about the beer industry
suggested that AB InBev may be under pressure by the government
to create more distance between itself and Crown, the
wholesaler, perhaps by getting rid of a provision allowing it to
buy back Crown in 10 years.
The government could also be willing to accept a plan where
AB InBev sells one of its 12 U.S. breweries or Modelo's plant
near Piedras Negras, Mexico, close to the Texas border, which
makes Modelo beers for the U.S. market.
A media report earlier this week said the company would not
be willing to sell the Piedras Negras plant.
Another source familiar with AB InBev leadership said the
company would likely be more open to scuttling the 10-year
buyback provision or to sell smaller brands like Rolling Rock.
One concern would be that if one of AB InBev's breweries
were sold, the new operator would not be able to run it as
efficiently as AB InBev or negotiate the same inexpensive,
high-volume grain purchases, which could lead to higher beer
Craft brewers have used the proposed transaction as a forum
to protest AB InBev's ties to distributors, essentially arguing
that its market dominance makes distributors reluctant to push
back when it complains about the distributors selling craft
But the Justice Department probe is not looking at that
concern, two sources said.
Asked for comment, AB Inbev spokesman Stan Neve said only
that the company expected the transaction to close in the first