Trading in Constellation Brands (STZ) was briefly halted this morning after its stock plunged 21% on news that the Justice Department has filed suit challenging the sale of its Grupo Modelo unit to Anheuser-Busch Invbev‘s acquisition of Grupo Modelo. As part of the deal, Constellation would have wholly acquired Crown Imports, which imports and markets Modelo brands in the US.
Per the DOJ’s announcement:
The department said that the $20.1 billion transaction would substantially lessen competition in the market for beer in the United States as a whole and in 26 metropolitan areas across the United States, resulting in consumers paying more for beer and having fewer new products from which to choose.
Americans spent at least $80 billion on beer last year.� According to the department, ABI�s Bud Light is the best selling beer in the United States and Modelo�s Corona Extra is the best-selling import.� Because of the size of the beer market in the United States, even a small increase in the price of beer could result in billions of dollars of harm to American consumers, the department said.
The department�s lawsuit, filed in the U.S. District Court for the District of Columbia, seeks to prevent the companies from merging and to preserve the existing head-to-head competition between the firms that the transaction would eliminate.
Trading has resumed, with the stock down 20% at the latest.
Update: Constellation has just issued a statement in reaction to the news:
Constellation Brands is disappointed with the DOJ decision. The proposed transaction would further establish Crown Imports as a more independent and competitive entity and solidify its position as a major player in the U.S. beer industry. We will provide further comment when appropriate.
Given today’s development, we no longer expect the deal to close during the first calendar quarter of 2013 but we ultimately look forward to an expeditious resolution.
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