The long proposed marriage of Anheuser-Busch InBev and Craft Brew Alliance (CBA) appears to be mere months away from consummation.
The U.S. Department of Justice on Friday gave its blessing to A-B’s proposed acquisition of the remaining stake in CBA — a deal finally reached in November 2019.
In Friday’s announcement, the DOJ laid out the reasons the regulatory agency was comfortable with allowing the world’s largest beer manufacturer to add the maker of Kona and other craft beer brands to its fold.
According to the DOJ, the agency’s requirement of CBA to divest of its Kona Brewing business in the state of Hawaii — but not in any other markets — in order for A-B to acquire the remaining shares of the Portland, Oregon-headquartered craft beer roll up will help preserve competition in Hawaii.
As such, the DOJ also approved the proposed buyer of the Kona business in Hawaii, PV Brewing Partners LLC — the partnership between former A-B president Dave Peacock and Overland Park, Kansas-based private equity firm VantEdge Partners. CBA announced its intention to sell its Kona operations in Hawaii to PV Brewing in June, several months after CBA and A-B acknowledged that the DOJ had sought a second review of the proposed merger.
Requiring the sale of Kona’s Hawaiian business will preserve “competition in the beer industry in Hawaii, benefiting consumers,” the DOJ said.
“This merger, as originally structured, would have significantly increased market concentration in Hawaii and eliminated the growing competition between ABI and CBA brands,” Makan Delrahim, Assistant Attorney General of the Justice Department’s Antitrust Division, said in a press release. “Today’s settlement with its divestitures will ensure that consumers continue to benefit from this competition today and into the future.”
As part of the process, the DOJ’s Antitrust Division filed a civil antitrust lawsuit on Friday in the U.S. District Court for the Eastern District of Missouri to prevent the $220 million proposed deal between A-B and CBA. However, the DOJ also filed a settlement to that lawsuit, that if approved by the court, would resolve the allegations of competitive harm alleged in the complaint.
The antitrust suit alleges that allowing the proposed acquisition to go forward would lessen head-to-head competition in Hawaii between A-B’s portfolio of brands and CBA’s Kona brand and lessen future competition between the companies. Without the divestment, A-B and CBA would have a combined 41% share of the Hawaiian beer market. Without competition from Kona in Hawaii, A-B would be able to “facilitate price coordination, resulting in higher prices for beer sold in Hawaii, amplifying competitive concerns.”
Under the terms of settlement, A-B and CBA are required to sell off the Kona business in Hawaii — including its brewpubs in Kailua-Kona and Honolulu and the under-construction 30,000 sq. ft., 100,000-barrel brewery, as well as the rights to brew, sell and distribute the Kona brand in Hawaii — to PV Brewing or another buyer approved by the United States.
Under the terms of the Tunney Act, the proposed settlement and a competitive impact statement will be published in the Federal Register. A 60-day comment period will allow consumers to file written comments to Robert A. Lepore, Chief, Transportation, Energy, and Agriculture Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street N.W., Suite 8000, Washington, D.C., 20530.
At the conclusion of the 60-day comment window, the U.S. District Court for the Eastern District of Missouri may enter a final judgment.
According to Law360, these review periods “have never rejected a merger clearance deal.”