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Why Constellation Shares Tanked

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of alcohol-seller Constellation Brands (NASDAQ: STX  ) took a hit today, after the Department of Justice filed a lawsuit to stop Anheuser Busch InBev's buyout of the remaining half of Grupo Modelo that it doesn't already own. Shares of Constellation, a tangential victim of the suit, finished down 17%.

So what: Constellation, the world's largest wine company, was set to become the sole distributor of Modelo beers, parent of Corona and other popular Mexican beers, giving it a powerful position. The Justice Dept. believes that the acquisition could cause beer prices to rise, and has stepped in to block the deal on antitrust grounds. AB InBev and Modelo shares fell sharply today, as well.

Now what: The Justice Department has broken some other major mergers on antitrust grounds, such as AT&T and T-Mobile, so it's not a surprise to see the agency standing in the way of further consolidation in the beer industry. Legal experts believe that the Justice Department has a strong case based on market share figures, so shareholders may have to adjust to the new reality. Constellation, through its Crown segment, would have had full control over the pricing, marketing, and distribution of Modelo products in the U.S.

Stay up to date on further developments with Constellation.

Read/Post Comments (2) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 01, 2013, at 6:46 AM, assisgnmeaname wrote:

    Rule #1 when writing about stocks Jeremy (and MF editors): Get the ticker correct. Constellation is STZ, not STX.

    That way people might take your opinion more seriously.

  • Report this Comment On February 02, 2013, at 5:33 AM, assisgnmeaname wrote:

    Wow - no correction or editor/writer comments after 24 hours. You guys are so slack. I don't know why I bother sometimes writing in your comment section...I'm thinking I'm one of the few people that actually bothers to read Motley Fool...oh well.

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