Constellation sells value spirits unit for $274M
Constellation Brands sells value spirits unit for $274 million, lowers fiscal 2009 guidance
- On 4:33 pm EST, Monday January 12, 2009
FAIRPORT, N.Y. (AP) -- Constellation Brands Inc. said Monday it is selling its value spirits business to Sazerac Co. for $274 million as it tries to focus on the more lucrative premium end of the wine and spirits markets.
The world's biggest wine company said the sale of more than 40 vodka, gin, rum, schnapps, cordial and other liquor brands will reduce its full-year profit guidance in its 2009 fiscal year ending Feb. 28.
The sale to New Orleans-based Sazerac, which is expected to close in February, includes $274 million in cash and $60 million in debt financing by Constellation Brands at market interest rates. The company said it plans to use the entire proceeds of about $210 million after taxes to pay down debt.
That "presents a modest positive catalyst" to investors, Deutsche Bank analyst Marc Greenberg wrote in a note to clients. But the sale, he said, also makes investors wonder "if disposals are clearing room for future acquisitions."
The value brands, many of them priced at about $6 for a 750-milliliter bottle, generated about $200 million in revenue in fiscal 2008 when Constellation Brands sold about 10 million cases. The unit accounts for about 5 percent of overall sales.
The deal will result in an estimated pretax reported loss for Constellation Brands of about $11 million, or 20 cents per share after taxes. As a result, the company lowered its 2009 earnings-per-share guidance to a range of 45 cents to 49 cents from a previous forecast of 65 cents to 69 cents.
The company left its comparable earnings forecast unchanged at $1.68 to $1.72 per share for fiscal 2009.
Analysts polled by Thomson Reuters expect the company to report earnings of $1.69 per share. Analyst estimates typically exclude one-time items.
"This transaction is consistent with our strategic focus on premium, higher-growth and higher-margin brands in our portfolio," Chief Executive Rob Sands said in a statement.
Among the brands being sold are Barton, a line that includes vodka, brandy, whiskey, gin, schnapps, rum and Long Island iced tea; Skol, which includes vodka, rum and gin; Mr. Boston, an assortment of schnapps, brandy, premix cocktails, cordials, gin, rum and vodka; and Fleischmann's, which includes whiskey, brandy, gin, rum and vodka.
Other brands included in the sale are the 99 schnapps line, di Amore cordials and the Chi-Chi's premixed cocktail line. Distillery and bottling operations included in the sale are located at Bardstown and Owensboro, Ky., as well as a leased bottling plant at Carson, Calif.
While many workers will transfer to the unit's new owners, some jobs will be lost because of the sale, Constellation Brands said.
Constellation Brands will keep its popular Svedka Vodka and Black Velvet Canadian Whisky brands, as well as its distillery in Lethbridge, Canada.
The company's more than 250 brands range from jug wines to coveted California reds, including the Ravenswood, Estancia and Woodbridge by Robert Mondavi labels. It also imports Corona and St. Pauli Girl beer.
Based in the Rochester suburb of Fairport, the company employs 8,200 people worldwide. Shares of the company rose 25 cents to end Monday's trading at $15.14.
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