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Interbrew/Ambev deal faces challenges.

Interbrew's plan to acquire Brazil's Cia. de Bebidas das Americas (Ambev) and become the world's largest brewer seems to be on track, but analysts said a few potential obstacles remain.

The deal is complex, involving a stock swap that will give Interbrew the opportunity to sell Stella Artois and Becks in Brazil and the rest of South America, while AmBev will sell its top brand, Brahma, in North America.

However, not everyone is pleased with this prospect. Brazil's second largest brewer, Schincariol, has filed a complaint with CADE, Brazil's antitrust agency, asserting that the influx of Interbrew brands will damage other Brazilian brewers.

The deal also has a challenger in North America, in the form of Fomento Economico Mexicano SA, or FEMSA. Its U.S. arm, Wisdom Import Sales Co., a part of Labatt U.S.A., has filed suit in a U.S. District Court to block portions of the deal.

And, as reported previously, Previ, the pension fund of Banco do Brasil, is asking the CVM, Brazil's security regulator to examine the deal.

Previ is arguing that since AmBev's stock price has dropped in the wake of the announced deal, the merger has caused financial harm to Previ.

Analysts said the FEMSA challenge seems to be the most dangerous, although they do not discount the ability of CADE to surprise.

The deal gives AmBev a 70% stake in Labatt U.S.A., essentially replacing Interbrew. But Wisdom and Interbrew have already been in court, as Wisdom is very protective of its Mexican portfolio. When Interbrew acquired Beck's, Wisdom sued successfully to keep Labatt U.S.A. from assimilating the Beck's brand.

As if the Interbrew/AmBev deal was not complicated enough, the deal give's Interbrew's 30% stake in FEMSA to AmBev. But FEMSA has right of first refusal on those shares, and could buy them. If FEMSA buys them, then Labatt U.S.A. in turn can buy back FEMSA's 30% stake in Labatt U.S.A. This would force Wisdom to find another partner or return to being an independent.
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Publication:Modern Brewery Age
Geographic Code:3BRAZ
Date:Apr 12, 2004
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