Constellation’s Brewery Acquisition Doesn’t Change Our Free Cash Flow Projection; Shares Overvalued
We don’t plan to change our $122 fair value estimate for narrow-moat Constellation Brands after its altered capacity addition plans. The company will acquire a brewery in Obregon, Mexico, from Anheuser-Busch InBev for $600 million, adding 4 million hectoliters of capacity (roughly 21% of the company’s fiscal 2016 production rate). This brewery was already producing beer for Constellation on a contract-brewing arrangement, and insourcing the manufacturing should boost Constellation’s consolidated...Constellation Brands is an international beverage alcohol company. The company is a producer and marketer of beer, wine and spirits with operations in the U.S., Mexico, New Zealand, Italy and Canada. The company has two segments: Beer, in which the company is engaged in the U.S. beer market that includes the imported, craft, domestic super premium, and alternative beverage alcohol categories and it has the right to import, market and sell these Mexican beer brands in the U.S.; and Wine and Spirits, in which its wine portfolio is supported by grapes purchased from independent growers, primarily in the U.S., New Zealand and Chile, and vineyard holdings in the U.S., New Zealand and Italy.
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