1/31/2013 5:58 PM ET|
Corona importer loses big in beer industry dustup
Constellation Brands' stock plummets after the Department of Justice blocks Anheuser-Busch InBev from buying Grupo Modelo.
Last summer, A-B made a $20.1 billion deal to increase its 50% stake in Mexican brewer Grupo Modelo and take control of its Corona, Modelo and Pacifico brands.
According to the Wall Street Journal, the Department of Justice filed suit on Thursday to prevent the deal from going down, saying it "would result in less competition and higher beer prices for American consumers." That undid Constellation's plan to buy Modelo's 50% stake in Crown Imports for $1.85 billion and become the sole exporter of Modelo products. That, in turn, sent Constellation stock plummeting more than 24% and forced Nasdaq to temporarily halt trading because of the volatility.
That's a shame for Constellation, but it's also a sign that the Justice Department didn't like the smell of this deal one bit. A-B and Constellation's argument was that Modelo's sale of its stake in Crown Imports gives Constellation the U.S. market share for any Modelo, Corona and Pacifico products sold in the U.S. Never mind that A-B would own Modelo and use its extensive distribution system to send it all over the country: Constellation would be the necessary middle man and take that unwieldy burden off A-B's shoulders while doubling its revenue in the process.
Even though Mexico's antitrust group OK'd the deal, the DOJ still wasn't buying it. Taking A-B out of the equation for a moment, Crown Imports' 5.7% U.S. market share is nearly equal to that of the entire craft beer industry combined, according to industry group the Brewers Association. It's larger than the 4% U.S. presence of European megabrewer Heinkeken and five times that of Guinness owner Diageo (DEO).
A-B has vowed to continue its battle in court, but the damage to Constellation has already been done. Constellation's plans for 2013 hinged on A-B's deal for Modelo being completed in the first quarter. Without it, Constellation's 2013 looks not only half-empty, but skunked.
More on moneyNOW
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] Equity indices continue hovering near their flat lines with the Nasdaq (+0.2%) trading a bit ahead of the Dow Jones Industrial Average (-0.1%) and S&P 500 (+0.1%).
In addition to drawing strength from biotechnology, the tech-heavy Nasdaq has received noteworthy support from microchip manufacturers after SanDisk (SNDK 83.65, +7.80) and Taiwan Semiconductor (TSM 20.70, +0.55) reported strong quarterly results. The two hold respective gains of 10.4% and ... More
More Market News
When a stock is a favorite of many of the most successful investors around, you know it's special.
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'