Constellation: Justice Dept. has 'incomplete understanding'

By ANDREA DECKERT - 2/1/2013 12:52:24 PM

The chief executive of Constellation Brands Inc. on Friday spoke out against a lawsuit announced Thursday by the U.S. Justice Department.

The suit filed by the Department of Justice seeks to stop Anheuser-Busch InBev SA from buying the half of Mexican brewer Grupo Modelo it does not already own, saying the $20.1 billion deal would lessen competition in the U.S. beer market.

Constellation Brands Inc.’s plans to acquire the remaining half of its Crown Imports LLC joint venture in a $1.85 billion deal. Last year, Constellation Brands announced the Crown Imports deal with Anheuser-Busch, which would give Constellation total control of distribution of popular Corona beers, among other products, in the United States.

Constellation Brands owns half of Crown Imports, a 50-50 joint venture with Grupo Modelo. Constellation signed a definitive agreement with AB InBev to purchase the remaining interest as AB InBev completes its proposed acquisition of Modelo.

Robert Sands, Constellation Brands’ president and CEO, said Friday the proposed transaction will enhance Crown’s status as an independent and competitive entity, and will strengthen Crown’s position as a growing competitor to AB InBev in the U.S. beer market.

Constellation pointed out three reasons the Justice Department’s action demonstrates its incomplete understanding of the proposed transaction.

They are: Crown Imports, not Modelo, is AB InBev’s competitor in the United States; Constellation Brands’ acquisition of Modelo’s interest in Crown will improve competition; and Crown will have even greater flexibility in responding to competitive factors in each of its markets.

“The Crown team has built its business into the third-largest beer company in the U.S., and it is surprising that the DOJ has overlooked the existence and commercial activities of this highly successful and autonomous business,” Sands said in a statement. “Crown’s president, Bill Hackett, a 29-year steward of the Modelo brands, and his team of established beer industry veterans have an outstanding track record of brand building and sales execution in the marketplace.”

The Victor firm had expected the deal to close this quarter, but no longer does given the Justice Department action.

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