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Shares of Constellation Brands (NYSE:STZ) were sent rallying Monday as Anheuser-Busch InBev (NYSE:BUD) is close to acquiring the reaming portion of Grupo Modelo it doesn't already own. The price tag is rumored to be $12-$20 billion for the remaining 50% that Anheuser Busch doesn't own. The already owned 50% came from InBev's buyout of United States based Budweiser back in 2008.

The deal between Anheuser Busch and Grupo Modelo will be beneficial for Constellation Brands in one of two ways:

· Anheuser Busch may elect to buy out Constellation's Crown Imports unit, which is partial owner of the distribution of many Grupo Modelo brands. I'm not sure what the amount would be or what the early termination rights are with the current contract. An early buyout is the most likely possibility if the Grupo Modelo deal goes through. Constellation would receive a significant premium for its ownership stake. Constellation could use the proceeds to strengthen its wine business or perhaps expand its growing spirits portfolio. I think Constellation should use the potential proceeds to buy some smaller spirits brands, like Beam did recently with Pinnacle and Skinnygirl.

· Anheuser Busch may choose to keep the joint venture in place, which would benefit Constellation Brands through its current contract. The current deal is in place through 2017. With Anheuser Busch behind the brands on a larger scale, they would likely push expansion into new countries and territories. In this scenario, Constellation would lose control of the venture in 2017, as Anheuser Busch InBev would let the deal expire and take control of distribution. Constellation would still see extended growth of the brands and increased revenue through the contract's expiration.

Constellation Brands operates brands under the following operating units:

Beer

Constellation's partial ownership of Crown Imports is what has shares rallying. Crown Imports is responsible for such brands as:

· Corona Extra

· Corona Light

· Modelo especial

· Negra Modelo

· Pacifico

· Tsingtao

· Victoria

Wine

Constellation's wine business is its centerpiece. The company owns over 100 different wine brands. The company owns brands like Robert Mandovi, Cos du Bois, Blackstone, and Estancia.

Spirits

· Svedka Vodka

· Black Velvet

· Paul Masson Brandy

· Danfield's Canadian Whisky (Regional)

· McMaster's Canadian Whisky (Regional)

· MacNaughton Canadian Whisky (Regional)

· Schenley Brands

Specialty Beverages

The remaining portion of Constellation's brands fall into the specialty beverage category. This group includes champagnes and wine spritzers. Brands include Arbor Mist, Naked Grape, Vex Hard Lemonade, Wild Irish Rose and Woodbridge

Constellation has grown though acquisitions to strengthen its beverage portfolio.

· BRL Hardy - 2003

· Nobilo - 2003

· Robert Mondavi - 2004

· Vincor International - 2006

· Spirits Marque One -2007

· Beam Wines - 2008

The recent acquisitions have strengthened the world leading premium wine brands portfolio that Constellation Brands owns. Vincor International, purchased for $1.44 billion, was the largest wine company in Canada. Beam Wines, owned by the former parent of Beam (NYSE:BEAM), was a strategic purchase for $885. The divesture by Beam parent Fortune Brands was necessary for the company to focus on their core group. Their loss became Constellation's gain as they were able to strengthen their brand portfolio at a decent price.

D.A. Davidson analyst Timothy Raney has a buy rating on shares of Constellation Brands. He argues that a deal between Grupo Modelo and Anheuser Busch would "put to rest the strong consensus view that Constellation will lose its rights to distribute the Modelo brands at the end of its current contract, which expires in 2017."

Constellation Brands reports first quarter earnings this Friday. Analysts on Yahoo Finance are looking for $0.39 per share in earnings. Even with today's jump, shares trade at less than ten times earnings. Analysts are calling for $2.00 in earnings per share this fiscal year. Next year, analysts see $2.25 in earnings per share. I think these numbers will be raised as analysts see the benefits of new distribution and partnership benefits with Anheuser Busch InBev. Wait for a slight pullback to buy and then accumulate shares. Shareholders will have to be patient for several months for the buyout offer to come in.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Grupo Modelo Buyout By Anheuser Busch InBev A Win For Constellation Shareholders