• Australian and Europe operations sold
  • Deal valued at AUD290m
  • Will continue to hold 20% stake
Constellation Brands sells off Australian wine assets

Constellation Brands sells off Australian wine assets

Constellation Brands has announced the sale of its Australian wine business, as well as operations in the UK and South Africa, to private equity group CHAMP for AUD290M (US$290.8m).

Constellation said today (23 December) that the sale includes "virtually all" of Constellation's Australian, UK and South African brands, wineries, facilities, vineyards and the company's 50% interest in Matthew Clark, the UK wholesale joint venture. The business is known collectively as Constellation Wines Australia and Europe.

California-based Constellation said that it would retain a 20% stake in the business, which includes the Hardys wine division in Australia. It expects to receive cash proceeds of AUD230m from Sydney-based CHAMP and the deal is set to complete at the end of January 2011.

The value of the deal is considerably less than the AUD1.85bn that Constellation paid to acquire BRL Hardy in Australia in 2003.

"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," said Constellation's president and CEO, Rob Sands.

"The Constellation Wines Australia and Europe business sells quality wines from the important Australian appellation and has significant scale, but continues to be faced with challenging market conditions," Sands said. "Therefore, the business is no longer consistent with Constellation's strategy."

CHAMP'S managing director, John Haddock, said that the private equity group would invest in the business. "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," he said.

Constellation said that it is still committed to growing its international business, despite considerably scaling back its operations outside of the US. "In addition to its operations in Canada and New Zealand, the Constellation Wines International organisation will increase its focus on selling the company's premium wine portfolio around the world," said the group, which owns Robert Mondavi wines.

The company said that it and CHAMP have signed a global supply deal for each other's wines. It added that the sale is not expected to affect earnings for its current fiscal year.

Earlier this week, just-drinks reported that a deal for Constellation's Australian wine business was "imminent".

For comment on impending changes to the Australian wine industry, published prior to the official announcement of this deal, click here.