Sunday, November 16, 2008

InBev could divest Labatt to mitigate antitrust concern in Anheuser-Busch deal, sources say

InBev, the Belgian brewing giant, may need to divest Ontario, Canada-based Labatt in order to complete its acquisition of Anheuser-Busch, according to industry sources. 
Once InBev completes its acquisition of Anheuser-Busch, it will control 50% of the US market, a level which could raise antitrust concerns with regulators, said an industry executive. While the executive had no knowledge of plans to divest the Labatt brand, he described such a move as a logical maneuver to scale back InBev’s North American presence and placate regulators. 
Anheuser-Busch has distributed InBev products since 1 February 2007 without raising any antitrust flags, though InBev’s Canadian portfolio, including Labatt, was excluded from that arrangement. Another industry source speculated that the exclusion of the Canadian brands was likely borne out of the companies’ concern that antitrust regulators would get involved. Now that all products will be coming under one umbrella, the source thought that the companies must deal with the antitrust implications that they had likely attempted to sidestep. 
As previously reported, an industry source said that the Department of Justice (DoJ) was “intensely scrutinizing” issues regarding Labatt market share in New York. This signals that Labatt would be a likely divestiture candidate, as there would be significant market overlap in the northeast between Anheuser and Labatt. 
This would not be the first time InBev has had to divest a brand in order to gain approval for an acquisition. In 2001, InBev sold its UK-based Carling brand to Coors in order to gain approval for its acquisition of UK-based Bass Brewers. 
The Canadian beer industry is dominated by Labatt and Coors and a likely acquirer would be a beer company looking for an entry into the Canadian market, said the executive. 
The industry source suggested that San Antonio, Texas-based Gambrinus Company; Wall, New Jersey-based Crown Distributors; and White Plains, New York-based Heineken USA could be interested in acquiring Labatt. None of them returned calls for comment. 

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