By Martinne Geller
NEW YORK, Feb 8 (Reuters) - Constellation Brands Inc asked to be joined as a defendant in the U.S. government’s lawsuit to block Anheuser-Busch InBev’s proposed takeover of Corona beer maker Grupo Modelo, seeking to protect its own interests in the mega merger.
As part of AB InBev’s plan to buy the half of Modelo it does not own for $20.1 billion, Modelo would sell its half of the Crown Imports joint venture to its partner, Constellation, for $1.85 billion.
But if the deal falls apart as a result of the action by the U.S. Department of Justice, Modelo would likely seek to buy Constellation’s stake in Crown, since it has signaled its intention to do so from the start and renewed its intention recently, the motion shows.
That would be a huge loss to Constellation, leaving it with mostly a wine business, which has agricultural volatility and little brand loyalty. At the time the deal was announced, analysts called it a “game-changer” for Constellation.
When asked if Constellation would seek other beer acquisitions, a source close to the company said it would consider all its options. A spokeswomen declined to comment.
A spokeswoman for Modelo confirmed the existence of the call option to take over Crown, at the end of 2016, but would not speculate on what the company would or would not do.
Constellation, whose brands include Robert Mondavi and Ravenswood, filed the motion to intervene in U.S. District Court for the District of Columbia. It was made public on Friday.
“If things go sideways, ABI and Modelo are not going to represent Constellation’s and Crown’s interests,” said a source close to Constellation, adding that Constellation wants “a seat at the table”.
AB InBev, the world’s biggest brewer, filed a memorandum in support of the motion. Grupo Modelo joined in the filing.
On Jan. 31, the U.S. Department of Justice sued to block the deal, saying it could mean higher U.S. beer prices.
The antitrust suit calls into question the future of one of the biggest deals of 2012, which would add beers like Corona Extra and Modelo Especial to a giant portfolio that already includes Budweiser, Beck’s and Stella Artois.
The companies have challenged the thinking of the DOJ, saying the net effect is “a more effective and competitive Crown,” since Crown will be owned by Constellation, a competitor, instead of half-owned by Modelo, its supplier, as it is now.
Constellation also said in a statement that Crown will compete more effectively in the future due to more favorable supply terms.
Through a revised supply agreement, Crown is protected from interference from its supplier, Constellation said, noting that the cost of beer purchased is based on a formula that adjusts annually at a rate below the U.S. Consumer Price Index.
The case is: U.S. v. Anheuser-Busch InBev SA/NV et al, U.S. District Court, District of Columbia, No. 13-00127.