Constellation Brands is looking into the possibility of merging a portion of its Australian wine business with Australian Vintage Ltd.

The move is one of a number of opportunities the drinks giant is considering for its Australian and UK businesses.

In a statement released today (2 November), Constellation said it is pursuing a number of opportunities with various parties to improve the prospects of its Australian and UK units.

"These include opportunities which may result in the sale of certain assets and a possible combination of a portion of Constellation's Australian and UK wine operations with Australian Vintage Ltd (AVL) in exchange for a substantial, but non-controlling, interest in the combined entity."

Headquartered in Sydney, AVL is a leading wine company in Australia.

Constellation said that the potential combination would create synergies between the two companies, allowing it to compete better in the current economic downturn.

If a transaction results, the combined companies would operate as a stand alone wine company, which would be listed on the Australian Stock Exchange (ASX).

"The Australian wine industry is facing unprecedented negative operating conditions," said Rob Sands, president and chief executive officer, Constellation Brands. "This combination would create a more competitive entity better positioned to deal with the current environment."

Talks, Constellation said, are ongoing and still may not lead to such a transaction.

"Constellation Brands remains focused on achieving stronger, more sustainable results by tightening the focus of the portfolio, optimising assets and finding synergies across all aspects of the business," said Sands.

In October, Constellation Brands posted a dip in sales but a healthy rise in profits for its fiscal first-half. The wine giant, which also operates in the beer and spirits sectors, said that net sales in the six months to the end of August slid to US$1.67bn, down from $1.88bn.

Net profits, however, leapt to $106.2m from $21.9m a year earlier, thanks in part to US shipment growth, savings from cost reduction efforts and the overlap of foreign currency losses from the prior year second quarter in its wine segment.

In August, Constellation Brands began a "realignment" process of its European and Australian wine divisions. The process followed the appointment in June of Troy Christensen, the president of Constellation Europe, to also head up Constellation Wines Australia.

Christensen said at the time that no further job cuts at either division were expected.

Speaking to just-drinks at the time, Christensen said his task was "to make the two businesses - Constellation Wine Europe and Constellation Wine Australia - highly dependent upon each other, and find synergies, which in this very difficult marketplace is very important."