--Motion seeks to permit Constellation and Crown to have direct access to legal proceedings
--Constellation says it believes the deals are good for beer consumers
--Anheuser-Busch InBev confirmed it filed a memorandum in support of Constellation and Crown's motion to intervene in the case
(Updates with comment from Anheuser-Busch InBev in second-to-last paragraph.)
By Nathalie Tadena
Constellation Brands Inc. (STZ, STZB) has filed a motion to intervene in the Department of Justice's lawsuit to block Anheuser-Busch InBev's (ABI.BT, BUD) $20.1 billion bid to buy Grupo Modelo (GMODELO.MX, GPMCY), as the wine-and-spirits maker is set to expand as part of a side deal in the proposed merger.
Last week, the U.S. government sued to block Bud Light and Budweiser maker InBev's deal with Grupo Modelo, the Mexican company that owns the Corona brand. U.S. authorities said they want to stop the global giants that dominate mass-market brews from overcharging millions of U.S. consumers.
Constellation and Crown Imports LLC, Constellation's joint venture with Modelo, weren't named in the DOJ's complaint, but the lawsuit directly affects both companies, they said. The motion seeks to permit Constellation and Crown to have direct access to the legal proceedings.
Constellation had agreed to buy out the Mexican brewer's stake in Crown Imports LLC for $1.85 billion. Crown was the two companies' evenly split joint venture that supplies the U.S. with Grupo Modelo beers such as Modelo and Corona. Constellation's role in the deal was InBev's attempt to alleviate some antitrust concerns, a bid to bolster a rival's position to take some pressure off InBev's dominant market-leading position. The planned deal would have doubled Constellation's annual revenue and given it more control of beers like Modelo Especial and Corona, which have outperformed the U.S. market.
Friday, Constellation said it believes the deals are good for beer consumers as Crown would be a stronger competitor in the U.S. Under the proposed deal, Crown would be wholly owned by Constellation, and InBev wouldn't sell Corona or the Modelo brands in the U.S. and would have no influence over Crown.
Constellation said Crown is the third-largest beer company in the U.S. and is guaranteed supply of a certain number of new products each year upon request. The company said the proposed deals don't increase concentration in the U.S. beer market; Constellation and Crown would compete more effectively in the future due to more favorable supply terms than previously existed, Constellation said. The company noted through a revised supply agreement, Crown is protected from interference from its supplier, and the cost of beer purchased is based on a formula that adjusts annually at a rate below the U.S. consumer price index.
Anheuser-Busch InBev confirmed it filed a memorandum in support of Constellation and Crown's motion to intervene in the case. The company said its memorandum also explains the proper legal standard for the DOJ's case requires evaluation of the net effect of the two proposed deal, which it said is a more effective and competitive Crown.
Class A shares of Constellation shares were unchanged in recent after hours trading after closing up 0.8% at $31.85. The stock is down 8.6% over the past three months.
Write to Nathalie Tadena at email@example.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires