While InBev SA has been ordered to sell off its Labatt business in the U.S. in order to complete its acquisition of Anheuser-Busch, Labatt says its operations in Canada will be largely unaffected.
The U.S. Justice Department approved the US$52 billion deal that allows Belgium-based InBev to acquire Anheuser-Busch, but only if the European company sells the U.S. distributor of InBev’s Canadian unit, Labatt Brewing Co.
Labatt Blue and Labatt Blue Light have a less than 1% share of the U.S. market, but in upstate New York, near the Canadian border, they go head-to-head with AB’s Budweiser and Bud Light, and MillerCoors brands like Coors Light and Miller Lite.
Without the sell-off, the Justice Department said beer prices would increase in the New York cities of Buffalo, Rochester and Syracuse due to lessened competition.
However, Toronto-based Labatt said it will not be greatly affected by Friday’s agreement, and the company will brew and supply its brands to a U.S. licencee for three years.
The existing Labatt USA operations, based in Buffalo, will be sold to that licencee, a deal the brewers expect to complete “as promptly as practical.”
“There’s virtually no impact in Canada,” said Nina Devlin, a spokeswoman for InBev.
Labatt started in 1847 in London and now employs about 3,000 people at breweries and sales offices across Canada.
Labatt sold 1.7 million hectolitres of beer in the United States in 2007, representing less than 15% of the total beer brewed in Canada. The sales are dwarfed by InBev’s volume of 169.4 million hectolitres through nine months in 2008.
Devlin said InBev has already received interest from several third parties, whom she declined to identify.
Morningstar analyst Ann Gilpin said the potential suitors could include wine giant Constellation Brands, importer of Corona, the leading U.S. import, and MillerCoors, the second-largest beer company in the United States.
“Obviously with the Molson portfolio that would be great for them, but I don’t know if antitrust would allow it, especially since they already have 30% share and you would have 80% in the hands of two players,” said Gilpin.
But MillerCoors spokesman Peter Marino said the Chicago-based company wouldn’t be interested in distributing the rival Canadian import beer.
“We’ve got the leading Canadian brand so there’s no interest.”
