Constellation Brands (STZ) is buying out Anheuser-Busch InBev’s 50% stake of Crown Imports. The deal gives Constellation 100% control of the importing business. Constellation is spending $1.85 billion to take control of the business. The new deal also makes Constellation the third largest beer supplier in the United States. There is a call option for AB InBev to buyout Crown Imports at 13 times EBITDA. The call option is good every 10 years for the largest brewing company in the World.
Constellation shares were up as much as 24% in trading during Friday’s session. Shares hit a new fifty two week high of $27.39, outdoing the previous $24.87. The closing price today will mark the highest close since 2007. Once earnings from the deal are realized, shares could approach their all time high of $29.50 seen back in June of 2005. Shares are up 40% since AB InBev’s talks began with Grupo Modelo. A buyout of Grupo Modelo put Constellation Brands in the spotlight. Rumors swirled of a buyout of Constellation’s stake in Crown Imports, but Constellation went the other route and became the acquirer.
The gem of the Crown Imports portfolio is Corona Extra. The beer brand is the number one imported beer to the United States. The beer also is the number six beer overall in the United States. The beer brands owned by Crown Imports are:
• Corona Extra
• Corona Light
• Negra Modelo
Along with the Crown Imports business, Constellation Brands also owns a wine business and premium spirits segment. In fact, Constellation has the largest portfolio of wine brands in the United States. Among the wine and champagne brands are:
• Black Box
• Robert Mondavi
• Clos du Bois
• Arbor Mist
• Wild Irish Rose
The company’s spirits brands include:
• Svedka Vodka
• Black Velvet
• Paul Mason Brandy
The new deal gives Constellation complete control over all aspects of the Crown Imports. Marketing, pricing, and distribution will be controlled by Constellation. In fiscal 2012, 164 million cases were sold by Crown Imports. The company saw $431 million of operating income on $2.47 billion in sales. The acquisition is expected to impact earnings significantly.
Constellation Brands also reported first quarter earnings on Friday. The company reported earnings per share of $0.38 on earnings of $72 million. Revenue of $634.8 million was down 1% from last year’s first quarter. Estimated earnings for the quarter were $0.39. Constellation is forecasting full year earnings per share of $1.93-$2.03. Analysts are predicting earnings to fit in the middle of the range at $1.99.
AB InBev bought the remaining stake in Grupo Modelo not owned already for $20 billion. The deal gives Anheuser Busch InBev brands that it can distribute into emerging markets, where beer sales are up. Anheuser Busch was willing to let the Crown Imports business go as it will still make money off of sales and the United States market is much more established than faster regions. Grupo Modelo also dominates the Mexican market, where it has over 50% of the market share.