Constellation Shares Jump on AB InBev-Modelo Talks

Monday, 25 Jun 2012 03:34 PM

 

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Shares of Constellation Brands Inc. gained the most in almost a decade as Anheuser-Busch InBev NV seeks to acquire the rest of Corona maker Grupo Modelo SAB in a deal that a person familiar with the talks said could bring a payment to Constellation.

Constellation advanced 12 percent to $21.60 at 3:02 p.m., after earlier rising 15 percent for the biggest intraday gain since June 27, 2002. The Victor, New York-based company, which had declined 6.3 percent this year through June 22, was the top performer Monday in the Standard & Poor’s 500 Index.

AB InBev may buy the rest of Modelo for about $20 billion, which includes a payment to Constellation to buy a stake in a distribution joint venture, said the person, who asked not to be identified because the matter is private. If the deal is successful, Modelo would have to pay Constellation about $3.5 billion to gain control of their venture to import beer into the U.S., analysts at Credit Suisse AG said today.

A transaction between AB InBev and Modelo would be a “huge positive” for Constellation, said Timothy Ramey, an analyst with D.A. Davidson & Co. in Lake Oswego, Oregon.

A deal would put to rest concerns that Constellation, the world’s largest winemaker, would lose its right to distribute Modelo brands at the end of their contract in 2017, said Ramey, who has a buy rating on the shares. Constellation has done an “excellent job growing the Corona/Modelo portfolio for 15 years” and it’s unlikely a combined company would want to disrupt that, said Ramey.

Modelo, based in Mexico City, confirmed Monday it is in strategic talks with AB InBev to expand its current relationship.

Leuven, Belgium-based AB InBev, the world’s biggest brewer, gained a non-controlling 50 percent stake in Modelo when AB InBev NV bought Bud Lite maker Anheuser-Busch Cos. in 2008 for $52 billion, the biggest brewing deal ever.

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