Divestiture of CBA’s Kona brand business under proposed settlement is intended to resolve antitrust concerns.
In order for Anheuser-Busch InBev SA/NV (ABI) and its wholly-owned subsidiary Anheuser-Busch Companies LLC to proceed with the acquisition of the remaining shares of Craft Brew Alliance Inc. (CBA) not already owned, the parties have agreed to divest CBA’s entire Kona brand business in the State of Hawaii and to license to the acquirer the Kona brand in Hawaii to resolve Department of Justice Antitrust Division concerns about the deal. The Antitrust Division filed an antitrust suit on September 18 in the federal district court in St. Louis to block the proposed $220 million transaction. At the same time, it filed a proposed final judgment that, if approved by the court, would resolve the competitive harm alleged in the lawsuit (U.S. v. Anheuser-Busch InBev SA/NV, Case No. 4:20-cv-01282).
In its complaint, the government alleged that the acquisition as proposed would have eliminated important head-to-head competition between ABI and CBA in Hawaii, and would have facilitated price coordination following the transaction. According to the complaint, ABI and CBA would have had a combined share of approximately 41 percent in the relevant market following the transaction. The relevant product market was limited to beer, and the relevant geographic market was limited to Hawaii. Further, the complaint noted that the market for beer in Hawaii showed signs of vulnerability to coordinated conduct.
Settlement terms. Under the terms of the proposed final judgment, ABI and CBA would be required to divest CBA’s entire Kona Hawaii business—Kona Brewery LLC—to PV Brewing Partners or to an alternative purchaser approved by the United States. Specifically, the settlement would require the sale of the Kona brewing facilities in Hawaii, including a new 100,000-barrel capacity brewery currently under construction; the granting of a perpetual, exclusive license of the Kona brand for the brewing, distribution, and sale of Kona beer in Hawaii as well as other assets, rights, and interests necessary to ensure that PV Brewing Partners, LLC, is able to compete in the Hawaii beer market using the Kona brand, the Justice Department announced. The settlement also would require ABI to notify the government in the event of an acquisition that is unreportable under the Hart-Scott-Rodino Act of a brewer that derives more than $3.75 million in annual gross revenue from beer sold for further resale in the State of Hawaii. A hold-separate order is currently in place.
The parties announced the proposed acquisition on November 11, 2019. At the time, ABI owned a 31.2 percent stake in CBA. In June 2020, the parties disclosed the plan to divest CBA’s Kona Brewing operations in Hawaii, including the new brewery and two brewpubs, to PV Brewing.
Attorneys: Jill C. Maguire, U.S. Department of justice, for the United States. Steven C. Sunshine (Skadden, Arps, Slate, Meagher & Flom LLP) for Anheuser-Busch InBev SA/NV, Anheuser-Busch Companies, LLC. Nelson O. Fitts (Wachtell, Lipton, Rosen & Katz) for Craft Brew Alliance, Inc.
Companies: Anheuser-Busch InBev SA/NV; Anheuser-Busch Companies, LLC; Craft Brew Alliance, Inc.; PV Brewing Partners; Kona Brewery LLC
MainStory: TopStory AcquisitionsMergers Antitrust AntitrustDivisionNews GCNNews
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