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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.
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