A-B Inbevs Modelo Merger Is Up in the Air; Plenty of Chatter Is Swirling around the Antitrust Review of the $20 Billion Deal

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Perhaps the only thing thats certain about Anheuser-Busch InBevs proposed $20 billion plan to fully own Mexican brewer Grupo Modelo is that nothing is certain.

A week of leaks and rumors about the big deal have the beer industry spinning, and a growing number of Wall Street analysts wonder if the merger might fall apart.

The chatter comes as lawyers at the Justice Department weigh whether the deal which would give A-B InBev control of roughly 52 percent of all beer sold in the U.S. violates federal antitrust laws.

To pre-emptively address those concerns when it announced the deal in June, A-B InBev signed a pact to import Modelo products such as Corona to the U.S. through a third party, New York-based Constellation Brands. The idea was to essentially create an extra buffer in the American market, but the fine print on the agreement may not be enough to satisfy regulators. The big worry is that A-B InBev might gain undue sway over beer prices.

Antitrust concerns have dogged the deal since the start. They heated up Monday with a New York Post report that said the Justice Department would seek major concessions before approving the deal. Those could include ordering the brewer to hire a third party to brew, not just import, Modelo products for the U.S. market, as it did with Labatt when InBev bought Anheuser-Busch in 2008.

Next came a report from The Capitol Forum, a Washington-based antitrust newsletter that has followed the deal closely, saying the Justice Department was planning to ask A-B InBev to sell production assets perhaps the massive Piedras Negras brewery in northern Mexico where much U.S.-bound Corona is made and was preparing to sue to block the deal if the brewer refused.

The least likely outcome, in our opinion, is that DOJ allows the deal to go through as is, the newsletter wrote.

Then came news in the other direction, a Bloomberg report that the brewer and the Justice Department were talking about tweaks to the Constellation deal, but not a brewery sale.

Late Wednesday, another Bloomberg piece cited people familiar with the matter as saying A-B InBev viewed selling Piedras Negras as a dealbreaker, a stance that could put the brewer and the Justice Department at loggerheads.

This series of anonymously sourced reports may shed more heat than light on the actual status of the merger. On the record, no ones saying much. A Justice Department spokeswoman declined to comment, while the brewer repeated its long-held position that the deal will close in the first quarter in other words by the end of March.

For that to happen, regulators would need to give their blessing within the next few weeks. People who watch the company are of mixed minds about whether that will happen.

We continue to think litigation is unlikely, wrote Mark Swartzberg, a beer industry analyst at Stifel Nicolaus & Co. …