ROCHESTER, N.Y. — Constellation Brands Inc. said Thursday it is selling an 80 per cent stake in its Australian and British wine business to an Australian private equity firm for about US$230 million, losing its distinction as the world’s biggest wine company.
The maker of Robert Mondavi wine and Svedka vodka will retain a 20 per cent stake in the business, and the deal with Sydney-based Champ Private Equity is expected to be completed by the end of January.
Based in Victor, New York, Constellation Brands bought Australian vintner BRL Hardy Ltd. for $1.1 billion in a 2003 deal that made it the world’s largest wine business. It jumped further ahead of longtime wine leader E.& J. Gallo Winery of Modesto, Calif., when it bought Robert Mondavi Corp. for $1.3 billion.
Offloading its Australian-British unit will drop the company to No. 2 in both volume and sales of wine behind Gallo. But it will remain the biggest seller by volume of premium-category wines priced between $5 and $15 a bottle, spokeswoman Angie Blackwell said.
Constellation shares rose 26 cents, or 1.2 per cent, to $22.24 in midday trading Thursday. The stock is trading at the upper end of its 52-week range of $14.60 to $22.42.
The sale includes virtually all of Constellation Brands’ Australian, British and South African brands, wineries and vineyards, plus its 50 per cent partnership in British wholesaler Matthew Clark. The transaction values the entire business at $290 million.
The division being sold “has significant scale but continues to be faced with challenging market conditions” and no longer fits with Constellation Brands’ strategy, CEO Robert Sands said in a statement.
UBS analyst Kaumil Gajrawala was upbeat about the deal. With the British and Australian business operating at breakeven to slightly profitable levels, the sale improves prospects for margins and revenue growth, he said in a note to clients.
In 2008, Constellation Brands began an overhaul of operations to counter a sales slowdown in Australia and Britain. Since then, it has been shaken by a wine glut in Australia and heightened private-label competition, falling prices and duty increases in Britain, where it’s been a leading marketer of wine.
Its main Australian wine brands are Hardys, Banrock Station, Leasingham and Chateau Reynella. Its non-U.S. wine portfolio also contains wines from core markets in New Zealand and Canada, where it owns the former Vincor Inc., Canada’s largest wine producer.
In its fiscal year ending in February, Constellation Brands posted $930 million in wine revenue in Australia, Europe and New Zealand — the bulk of it coming from its Australian and British operations. Its overall annual sales fell to $3.65 billion from $3.77 billion in the previous year.
In recent years, the company has shifted focus toward higher-priced wines and spirits, selling off some of its lower-price brands after a two-decade acquisition spree. It also has consolidated divisions, cutting its work force to 6,000 people from 8,200 in 2008.
The company draws more than 90 per cent of its revenue from mostly moderately priced wines. Among its 100-plus brands are Clos du Bois, Woodbridge by Robert Mondavi, Blackstone and Ravenswood.
It also sells liquors such as Black Velvet Canadian whiskey and, through a wholesale joint venture, imports beers including Corona from Mexico, Tsingtao from China and St. Pauli Girl from Germany.