AB InBev Merger

with
Grupo Modelo
Group 9
Akshay Bundela (PGP09132)
Amit Kumar Dhawan (AKD) (PGP09134)
Yash Jalan (PGP09183)
About the Merger

Anheuser-Busch InBev
made an agreement of
around $ 20 billion to
takeover the remaining
50% share of the Grupo
Modelo
 US Regulations
The deal fall prey to global antitrust regulators

The U.S. government sued to block the world's biggest beer maker from spending $20 billion to get
even bigger
Blocked by US government and justice department to prevent any overcharging by the global giants
that dominate mass-market brews
Market share in US of AB InBev was around 39% and that of Modelo was 7%, which together would
control about 46% of U.S. sales

The deal is likely to give ABI enhanced pricing power over its competitors

Law suit caused a sharp decline in share price of AB InBev, and Grupo Modelo

Much harder decline in the share Constellation Brands Inc. because it was set to expand as part of a
side deal in the merger

Expected the combined company to deliver cost and revenue benefits of at least $600 million annually

To increase its penetration of emerging markets such as Mexico

 Case Analysis
Forced AT&T Inc. to drop its acquisition of rival cell phone provider T-Mobile USA
Similar
cases and European regulators blocked the merger of Deutsche Börse AG and NYSE Euronext
rulings: United Parcel Service Inc. abandoned its bid for Dutch delivery company TNT
Express after European objections

Arguments given by AB InBev:

• Price would be decided separately

• Grupo Modelo sell its half stake for $1.85 billion in a U.S. Constellation
Brands that imports and markets Corona in the U.S
• U.S. beer market is already sufficiently competitive

AB InBev have to pay Modelo a $650 million breakup fee, if the agreement fall apart as
a result of antitrust challenge
Arguments given by Department of Justice:

• When AB InBev raises beer prices, Miller Coors usually follows, while Modelo has
been resistant
• Modelo, an important competitor that puts pressure on AB InBev to maintain or
lower prices
• The arrangement with Constellation would preserve only a "façade" of
competition because Constellation would still rely on AB InBev for its beer supply
• The transaction violates antitrust law
• InBev already owns a 50% economic stake in Modelo
• Eliminate the “substantial head- to-head competition” between AB InBev and
Modelo
• Diminish ABI’s incentive to innovate

Grupo Modelo Arguments:

• To address anti-trust concerns, Grupo said it would sell its half stake in a U.S.
distributor that imports and markets Corona in the U.S
• That distributor was to become wholly owned by Constellation Brands, prices of
Corona & Bud Light would be decided separately
Speculations to solutions:

• AB InBev could offer additional concessions

• Like giving up or restructuring its 10-year option to buy the U.S. rights
for all Modelo brands from Constellation's Crown subsidiary and giving
Crown more stability
• AB InBev could also be pushed to sell a big brewery to Crown to give
its production capacity
• May have to give up more control of U.S. beer distribution or sell a
brewery to settle an antitrust lawsuit
• Fight a lawsuit
• Walk away
Thank You