--Reports that Corona brewer may get fully acquired put
Constellation in position to keep its beer pact or get paid to sell
it
--Shares jump 13%, making Constellation best performer in the
S&P 500 as broader market slumps
--Analyst says news should alleviate some uncertainty about the
contract's future
By John Kell
Constellation Brands Inc. (STZ) shares jumped Monday as
investors digested reports that Corona brewer Grupo Modelo SAB
(GPMCY, GMODELO.MX) may get fully acquired--possibly putting the
winemaker in a position to keep its beer-distribution pact or get
paid handsomely to sell it.
Analysts said speculation that Modelo might get fully acquired
by Anheuser-Busch InBev NV (BUD, ABI.BT), which already owns a 50%
noncontrolling stake in Modelo, will ease a consensus view that
Constellation would lose its right to distribute Modelo's brands at
the end of a 10-year contract that is set to expire in 2017.
The maker of Robert Mondavi and Ravenswood wines saw shares jump
13% to $21.81 in recent trading, making it by far the best
performer in the S&P 500 as the broader market slumped.
To put the rally in perspective, investors added roughly $432
million to the company's market capitalization from Friday's
closing price, and Constellation is now valued at $3.86
billion.
Modelo brands--including U.S. import Corona Extra--are imported
into the U.S. and marketed through a joint venture that Modelo has
with Constellation. Constellation's earnings from its 50% stake in
Crown Imports totaled $215 million last fiscal year.
D.A. Davidson analyst Timothy Ramey said the news should
alleviate some existing uncertainty about the future of the
contract, saying the market had been highly concerned Constellation
would lose the business in 2017.
Mr. Ramey has a favorable view of Constellation's Crown Imports
pact, saying the premium-beer business has solid growth prospects
in the beer category. If a deal with InBev does occur, he said, an
antitrust review is likely to require Modelo to make a decision on
distribution plans before the approval is cleared in the U.S., and
the Justice Department may prefer for Constellation to keep the
contract to ease antitrust concerns.
Mr. Ramey estimated the joint venture should contribute about
$221 million to Constellation's fiscal-2013 earnings before
interest and taxes, and about 78 cents to his firm's earnings
estimate of $2 a share for that period.
A Constellation spokeswoman said the company doesn't comment on
its stock performance or market rumors.
--Amy Guthrie contributed to this article.
Write to John Kell at john.kell@dowjones.com.