The U.S. Department of Justice is seeking additional information and documentation from Anheuser-Busch InBev and Craft Brew Alliance (CBA) as the two companies work toward a planned merger that was announced last November, according to a filing this morning with the U.S. Securities and Exchange Commission.
“This agreement is subject to customary review required for similarly sized transactions, and we’re continuing to cooperate with regulators on that process,” a CBA spokesperson said in a report from Brewbound.
Following the announcement of the merger on November 11th, both companies filed documents on December 6 with the U.S. Federal Trade Commission and the DOJ’s antitrust division, as required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, according to a Form 8-K filed today by CBA with the SEC.
A-B withdrew those documents and re-filed them on January 6th, prompting the DOJ’s February 5th request for additional information, referred to as the “second request.”
“The effect of the second request is to extend the waiting period imposed by the HSR Act until 30 days after the company and ABC have substantially complied with the second request, unless that period is extended voluntarily by the parties or terminated sooner by the DOJ,” according to the Form 8-K. “Both parties intend to continue to work cooperatively with the DOJ in its review.”
The deal is expected to close later this year; an exact date has not been announced. A shareholder vote on the transaction is slated for February 25th.
The road to A-B finally agreeing to acquire the remaining stake of CBA had many twists and turns. The relationship between the two companies dates back decades, to A-B acquiring a minority stake in Seattle-based Redhook in 1994.
Last August, the world’s largest beer manufacturer declined to make a qualifying offer of $24.50 per share to purchase the 68.8% of CBA it did not already own. A 2016 agreement set August 2019 as the deadline by which A-B could make a qualifying offer or pay a fee.
Instead, A-B paid CBA a one-time $20 million fee. However, A-B came back three months with an offer of $16.50 per share. The deal valued the company at $320 million. Prior to the agreement, CBA’s stock (BREW) was trading at $7.33 per share and more than doubled after.
If the deal closes, A-B would acquire the fast-growing Kona Brewing brand, which produced around 500,000 barrels in 2019. According to market research firm IRI, off-premise dollar sales of Kona’s flagship Big Wave Golden Ale increased nearly 17%, to almost $30 million, in 2019. Portfolio wide CBA off-premise dollar sales for CBA’s portfolio, which also includes Redhook, Widmer Brothers, Omission, Square Mile Cider, Wynwood Brewing, Cisco Brewers and Appalachian Mountain Brewery, as well as the pH Experiment, declined 1.8%, to $122.9 million, making the company the 17th largest beer maker in the U.S.
CBA’s brands will join A-B’s craft division, the Brewers Collective, which includes acquired brands such as Goose Island, Elysian, 10 Barrel, Golden Road, and Wicked Weed, among others.
Beyond DOJ approval, the proposed marriage of A-B and CBA may face one additional hurdle.
A lawsuit filed on January 29, 2020, in the U.S. District Court for the District of Delaware alleges that CBA released a proxy statement on January 21, 2020, that omitted “material information with respect to the proposed transaction, which renders the proxy statement false and misleading” and violated the Securities Exchange Act of 1934.
The plaintiff, Eric Sabatini, is seeking a jury trial for a class action lawsuit, and he is asking the court to prevent CBA and A-B “from proceeding with, consummating or closing the proposed transaction,” among other requests for relief.
According to court documents, Sabatini purchased 50 shares of BREW stock for $9.88 a share on September 3, 2019.
A CBA spokesperson declined to comment on the lawsuit.