BREAKING: Constellation Intervenes in DOJ Case

FILED FEBRUARY 8, 2013

Dear Client:

Constellation Brands has just filed a motion to intervene in the DOJ's lawsuit against AB InBev to block the sale of Modelo to ABI. Constellation in its motion cites a lot of legalese as to why it should be allowed to intervene in the case, as it stands just as much or more to lose if the DOJ is successful.

Constellation stresses that if the DOJ is successful in blocking the deal, ABI and Modelo will continue on as business-as-usual, but Constellation has the very real risk of being terminated by Modelo. "At any time up to three years that will end December 31, 2016," Modelo has the right to notify Constellation that it "intends to purchase Constellation's interest in Crown at the end of the term."

That's not all. Apparently Modelo has always signaled its intention to buy back its stake in Crown from the beginning (which should be news to Wall Street). Says the motion: "Towards the beginning of the Crown relationship, Modelo stated that it intended to purchase Constellation's interest at the end of the initial term, and Modelo has indicated a similar intention more recently." That's not good. That puts Constellation's position in a more dire position should DOJ be successful.

Says crown in a release this afternoon: "Crown is the third largest beer company in the U.S. with a strong portfolio of well-known brands. Crown is guaranteed supply of a certain number of new products each year upon request. The transactions do not increase concentration in the U.S. beer market. Crown, which prices, markets and distributes Corona and the Modelo portfolio in the U.S., will be completely independent after the transactions. Thus, competition will increase as AB InBev will have no economic interest in Crown's business."

ABI SUPPORTS MOTION. ABI issued a statement saying that it supports STZ's motion to intervene. It says: "Anheuser-Busch InBev today confirmed that it has filed a memorandum with the United States District Court for the District of Columbia in support of Constellation Brands, Inc. and Crown Import LLC's Motion to Intervene as parties to the antitrust complaint filed by the U.S. Department of Justice (the "DOJ") on January 31. Grupo Modelo, S.A.B. de C.V. has joined in the filing. This filing is in connection with AB InBev's pending transaction to acquire the remaining shares in Modelo that it does not already own."

It's getting interesting. More in next issue.

Until tomorrow, Harry

"What some people mistake for the high cost of living is really the cost of high living."
-Doug Larson

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