Constellation Brands sells of Australian and UK wine business

Published: 29 December, 2010

Constellation Brands has signed an agreement to sell its Australian and UK wine business to CHAMP Private Equity of Sydney, Australia.

The Constellation Wines Australia and Europe (CWAE) division is to be sold in a deal worth A$290 million. In a statement the company said it would "retain around 20% interest in the business and receive cash proceeds of about $230 million, subject to closing adjustments".

The deal is expected to be completed by the end of January and includes the transfer of Constellation's Australian, UK, and South African brands, wineries, facilities, vineyards, and the company's 50% interest in Matthew Clark, the UK wholesaler. All CWAE employees will transfer with the business and there are no details as yet of any job losses.

Rob Sands, Constellation Brands' president and chief executive officer, said: "During the last two years, Constellation has implemented a strategy focused on driving profitable organic growth through premiumising its world class brand portfolio and improving margins, return on invested capital and free cash flow."

He added: "The CWAE business sells quality wines from the important Australian appellation and has significant scale, but continues to be faced with challenging market conditions. Therefore, the business is no longer consistent with Constellation's strategy. We believe CHAMP has the requisite skills and motivation necessary for accelerating the success of the CWAE group."

Constellation stressed it remained "committed to growing its international business and continuing to invest in and drive its premium wine portfolio around the world".

It will continue with its operations in Canada and New Zealand and its focus on selling the company's premium wine portfolio around the world. Constellation and CHAMP will work together to distribute and supply each other's products globally.

Constellation expects that net proceeds will be used to reduce borrowings.

"CHAMP is committed to supporting management in building a competitive and profitable business in the Australian and UK markets and will invest to grow the business," said CHAMP managing director, John Haddock.

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