Justice Department Requires Divestiture In Order For Anheuser-Busch To Acquire Craft Brew Alliance
September 18, 2020
The Department of Justice announced today that it is requiring Anheuser-Busch InBev SA/NV (ABI), its wholly-owned subsidiary Anheuser-Busch Companies LLC (AB Companies), and Craft Brew Alliance Inc. (CBA) to divest CBA’s entire Kona brand business in the state of Hawaii and to license to the acquirer the Kona brand in Hawaii in order for AB Companies, a minority shareholder in CBA, to proceed with its proposed acquisition of the remaining shares of CBA. The department has approved PV Brewing Partners, LLC as the acquirer. The proposed settlement will maintain competition in the beer industry in Hawaii benefitting consumers.
The Justice Department’s Antitrust Division filed a civil antitrust lawsuit today in the U.S. District Court for the Eastern District of Missouri to block the $220 million proposed transaction. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the competitive harm alleged in the lawsuit.
According to the department’s complaint, AB Companies’ acquisition of CBA likely would substantially lessen head-to-head competition in Hawaii between ABI brands, such as Stella Artois and Michelob Ultra, and CBA’s Kona brand. If the transaction was allowed to proceed, ABI and CBA would have a combined share of approximately 41 percent in the moderately concentrated Hawaii beer market. The merger would also likely harm future competition between ABI and CBA as, absent the merger, the companies would continue to invest and compete against each other for premium beer sales in the state. By eliminating CBA’s Kona brand as a competitive restraint, ABI would also likely have greater ability to facilitate price coordination, resulting in higher prices for beer sold in Hawaii, amplifying competitive concerns.
“This merger, as originally structured, would have significantly increased market concentration in Hawaii and eliminated the growing competition between ABI and CBA brands,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “Today’s settlement with its divestitures will ensure that consumers continue to benefit from this competition today and into the future.”
Under the terms of the proposed settlement, ABI and CBA must 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 requires 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.
ABI is a corporation organized and existing under the laws of Belgium, with its headquarters in Leuven, Belgium. ABI is already a minority shareholder in CBA. ABI proposes to acquire 100 percent ownership of CBA through AB Companies, a Delaware limited liability company that currently holds a minority ownership stake in CBA. ABI owns numerous major beer brands sold in the United States, including in Hawaii. These brands include Bud Light, Budweiser, Busch Light, Natural Light, Michelob Ultra, Stella Artois, and Golden Road.
CBA is a corporation organized and existing under the laws of Washington, with its headquarters in Portland, Oregon. CBA owns several beer brands sold in the United States, including Widmer Brothers, Omission, Redhook, and Kona, a brand that originated in Hawaii and is especially popular in that state.
PV Brewing Partners LLC, is a Delaware limited liability company with its headquarters in Overland Park, Kansas. The entity was formed by VantEdge Partners LP, a private equity company based in metropolitan Kansas City.
As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period 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 period, the U.S. District Court for the Eastern District of Missouri may enter the final judgment upon finding it is in the public interest.