February 14, 2013
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 Constellation Brands (NYSE: STZ ) were heading for the stars today, climbing as much as 38%, after a new agreement was reached between AnheuserBusch InBev and Grupo Modelo that would appear to pass Department of Justice's muster.
So what: The government had planned to file an antitrust suit against AB InBev's original plan to buy Modelo, but the world's largest beer maker has said it will now sell Modelo's Piedras Negras brewery near the U.S. border to Constellation for $2.9 billion. The deal gives Constellation, the world's largest wine maker, the rights to sell Corona and other Modelo brands in the U.S., and would alleviate the concerns about AB InBev gaining further market share in the U.S. The DOJ has not yet commented on the new deal, but analysts believe it should satisfy the agency's antitrust concerns.
Now what: Constellation shares dropped 17% when the DOJ announced it would block the acquisition just two weeks ago, and they now trade 10% above where they stood before the big fall. Oddly, Constellation seems to have benefited from the Justice Dept.'s initial concerns, because it otherwise wouldn't have had an opportunity to buy the brewery. The deal gives it a strong brand portfolio in a foothold in an increasingly concentrated market. Today's news definitely looks like a win for Constellation.
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