Constellation Brands Inc
) efforts to expand its presence in the U.S. beer market paid off
on Friday with the completion of the acquisition of
Grupo Modelo, S.A.B. de C.V.
) U.S. beer business from
) for approximately $4.75 billion.
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As part of the deal, Constellation Brands acquired Grupo Modelo's
Piedras Negras brewery in Nava, Mexico; Grupo Modelo's 50% stake
in Crown Imports LLC; perpetual rights to market and sell Corona
and other Grupo Modelo's brands currently distributed by Crown in
the U.S.; and the autonomy to develop new products and line
extensions within the portfolio of brands for the U.S. market.
Following the completion of the transaction, Constellation Brands
is now an independent brewer and marketer of beer in the U.S. The
company will operate as one company with two divisions: a beer
division and a wine and spirits division. The company can now
sell all brands in Crown's portfolio including Corona Extra,
Corona Light, Modelo Especial, Negra Modelo, Pacifico and
Victoria from Mexico and Tsingtao from China.
Additionally, Constellation has signed a 3-year agreement with AB
InBev to carry out the smooth transition of the operations of the
Piedras Negras brewery. In this transition period, Constellation
is committed to spending $500-$600 million towards the expansion
of this facility in order to double its current capacity to meet
the projected demand for products in the U.S.
Further, the sale of Grupo Modelo's U.S. beer business to
Constellation Brands forms a part of AB InBev's recently
completed deal to buy Grupo Modelo. Completed on Jun 4, 2013, the
deal between AB InBev and Grupo Modelo was initiatlly rejected by
the Department of Justice on anti-competitive concerns about AB
InBev's larger purchase of Mexican brewer Grupo Modelo. But
later, the deal received approval from the department after AB
InBev agreed to sell Modelo's U.S. business to Constellation
Constellation Brands is the largest wine company in the world and
commands a dominant position in the premium wine segment in the
U.S. The company is also a leading producer of wine in Canada and
New Zealand. This provides a competitive edge to the company and
bolsters its well-established position in the market.
Moreover, continued focus on brand building and promotion along
with strategic acquisitions will accelerate its growth
opportunities while strengthening its market position.
Constellation Brands currently has a Zacks Rank #2 (Buy). Other
stocks worth considering in the beverages-alcohol industry are
Anheuser-Busch InBev, Grupo Modelo, S.A.B. de C.V. and
). All these stocks hold a Zacks Rank #2 (Buy).