Will the proposed Molson Coors/SABMiller deal decrease or increase competition? The answer to that question could determine whether the deal is allowed to go through.
From
The New York Times:
Analysts and investors seem to be waving aside the possibility that the proposed merger of SABMiller and Molson Coors in the United States could run into trouble with regulators. But not that long ago, a similar deal seeking to combine the No. 2 and No. 3 players in a consolidated industry — sometimes called a 3-to-2 deal, because it reduces the industry leaders from three to two — was blocked on antitrust grounds.
That was H.J. Heinz’s attempt to buy the maker of Beech-Nut baby food, a $185 million transaction Heinz ended up abandoning.
Together, Heinz and Milnot, the parent of Beech-Nut at the time, would have controlled nearly 33 percent of the retail baby-food market; Gerber, the industry leader, controlled 65 percent. Compare that with the numbers in Tuesday’s proposed deal, in which a combined MillerCoors would have a 29 percent share of the U.S. beer market, and Anheuser-Busch would have 49 percent, according to analysts at Citigroup.
Many think that regulators won’t blink at the MillerCoors transaction. They have argued that the deal could be seen as increasing competition, rather than diminishing it, because it will create a stronger and more efficient rival to Anheuser-Busch, whose brands include Budweiser and Bud Light.
A similar argument was put forward in favor of the Heinz-Milnot transaction — and it did get some traction early on. A lower court initially approved the deal, only to have it overturned by an appeals panel in April 2001. At the time, Robert Pitofsky, the departing chairman of the F.T.C., now in private practice at Arnold & Porter, told The New York Times that the decision was one of the most important antitrust cases during his six years leading the agency.
