Constellation Shares Drop as DOJ Blocks Modelo Deal


The Department of Justice plans to sue to block Anheuser-Busch InBev's proposed purchase of the rest of the Mexican brewer Grupo Modelo, a move that jeopardizes Constellation Brands' plans to fully acquire Crown Imports.

Constellation shares plummeted about 20 percent, triggering several trading halts, after news of the development broke. Crown Imports brings brands owned by Grupo Modelo into the United States. Meanwhile, shares of Anheuser-Busch InBev slid aobut 5 percent.

The Justice Department said Anheuser-Busch's InBev's $20.1 billion acquisition of the Grupo Modelo stake would lessen competition in the U.S. beer market.

In a statement, Constellation Brands expressed disappointment with the Justice Department's decision.

"The proposed transaction would further establish Crown Imports as a more independent and competitive entity and solidify is position as a major player in the U.S. beer industry," Constellation said, in a press release.

Constellation had anticipated that the deal would close in the first quarter of this year, but that is no longer the expectation.

Anheuser-Busch InBev plans to contest the ruling. Heading into the ruling, the company was the top brewer in the U.S. by far with a 47 percent share of the U.S. beer market.

That was the reason behind the plan to have Constellation purchase Crown Imports, Modelo's distributor, for $1.85 billion. But the plan apparently was not enough to satisfy the Justice Department's concerns.

In a statement, Anheuser-Busch InBev said the decision was "inconsistent with the law, the facts and the reality of the market place."