ST. LOUIS -- Perhaps the only thing that's certain about Anheuser-Busch InBev's proposed $20 billion plan to fully own Mexican brewer Grupo Modelo is that nothing is certain.
A spate of leaks and rumors about the big deal have the beer industry spinning, and a growing number of Wall Street analysts wonder if the merger might fall apart.
The chatter comes as lawyers at the Justice Department weigh whether the deal -- which would give A-B InBev control of roughly 52 percent of all beer sold in the U.S. -- violates federal antitrust laws.
To pre-emptively address those concerns when it announced the deal in June, A-B InBev signed a pact to import Modelo products such as Corona to the U.S. through a third party, New York-based Constellation Brands. The idea was to essentially create an extra buffer in the American market, but the fine print on the agreement may not be enough to satisfy regulators. The big worry is that A-B InBev might gain undue sway over beer prices.
Antitrust concerns have dogged the deal since the start. They heated up last week with a New York Post report that said the Justice Department would seek "major concessions" before approving the deal. Those could include ordering the brewer to hire a third party to brew, not just import, Modelo products for the U.S. market, as it did with Labatt when InBev bought Anheuser-Busch in 2008.
Next came a report from The Capitol Forum, a Washington-based antitrust newsletter that has followed the deal closely, saying the Justice Department was planning to ask A-B InBev to sell "production assets" -- perhaps the massive Piedras Negras brewery in northern Mexico where much U.S.-bound Corona is made -- and was preparing to sue to block the deal if the brewer refused.
"The least likely outcome, in our opinion, is that DOJ allows the deal to go through as is," the newsletter wrote.
Then came news in the other direction, a Bloomberg report that the brewer and the Justice Department were talking about tweaks to the Constellation deal, but not a brewery sale.
Afterward, another Bloomberg piece cited "people familiar with the matter" as saying A-B InBev viewed selling Piedras Negras as a "dealbreaker," a stance that could put the brewer and the Justice Department at loggerheads.
This series of anonymously sourced reports may shed more heat than light on the actual status of the merger. On the record, no one's saying much. A Justice Department spokeswoman declined to comment, while the brewer repeated its long-held position that the deal will close in the first quarter -- in other words, by the end of March.
For that to happen, regulators would need to give their blessing within the next few weeks. People who watch the company are of mixed minds about whether that will happen.
"We continue to think litigation is unlikely," wrote Mark Swartzberg, a beer industry analyst at Stifel Nicolaus & Co. He points out that there's no likely buyer for Piedras Negras and suggests that the deal will be approved with "comparatively small" concessions by A-B InBev.
But Ian Shackleton, a beverage analyst at Nomura International, predicts "draconian" concessions that could blow up the deal.
"We now believe that the deal will not happen or will be subject to significant remedies that will substantially reduce the potential upside for (A-B InBev) shareholders," he wrote in a note last week that downgraded his view of the stock.
Antitrust experts note that the Justice Department has become more aggressive under President Barack Obama, pointing to its 2011 move to block AT&T's purchase of T-Mobile. They note that the government reportedly has eight or nine attorneys working on the Modelo case, a sign that it's armed for a fight. Those lawyers' decision may hinge on to whom they decide to listen.
In addition to A-B InBev, Modelo and Constellation, Justice Department lawyers have been interviewing beer wholesalers about competitive aspects of the deal, according to people familiar with the process. They have sat down, too, with brewing rivals like MillerCoors and Yuengling. The Brewers Association, a trade group for craft brewers, has hired a well-connected Washington law firm to make sure its voice gets heard.
All these players, people familiar with the talks say, have given regulators an earful about growing tensions in the beer business, particularly around the complex system that gets beer to market.
A-B InBev has talked openly in recent years about consolidating its sprawling network of U.S. wholesalers as a way to boost profits and efficiency. The wholesalers don't welcome such talk.
Craft brewers worry about this consolidation, too, because they need the distribution networks set up by A-B and MillerCoors to bring their beer to store shelves. Some worry that the big brewers hope to cut them out and replace independent beers with their own craft labels.
While neither of those issues is directly related to A-B InBev's purchase of Modelo, they're probably fueling concern about the deal, said Harry Schuhmacher, publisher of trade magazine Beer Business Daily. After all, the 800-pound gorilla of the beer industry is trying to pack on a few more pounds. This is a chance for the little guys to make sure they don't lose their lunch in the process.
"If it wasn't (A-B InBev), I don't think there'd be nearly so much concern," he said. "But they're such a big player, and they've shown they have sharp elbows on this stuff."
Industry watchers say the Justice Department's antitrust lawyers could tighten the brewer's agreement with Constellation in a way that protects wholesalers and craft brewers -- and helps to keep a variety of beer on the shelves. But will they? Like much else in this merger, that remains to be seen.