Constellation Brands has sold certain US wine assets to Eight Estates Fine Wines, a Sonoma-based private firm.

Included in the sale, which was confirmed today (10 July), are; Geyser Peak, Buena Vista, Gary Farrell, Atlas Peak and XYZ in California, which were acquired from Fortune Brands last year; Columbia Winery and Covey Run (including Sunnyside winery) in Washington State; and Ste. Chapelle in Idaho, all acquired in 2001 from Corus Brands.

Under terms of the agreement with Eight Estates - doing business as Ascentia Wine Estates - Constellation received US$209m in cash, and could receive up to an additional $25m in payments, if certain objectives are achieved by the buyer.

Constellation said it will use the proceeds from the sale to reduce borrowings.

"Sale of these assets will aid in streamlining Constellation's US wine portfolio by eliminating brand duplication and excess production capacity," said Rob Sands, Constellation's president and CEO. "We feel our customers and consumers are well served by our extensive California wine portfolio and by the Hogue Cellars brand produced at its Prosser, Wash., winery. This transaction also provides cash to further reduce our borrowings and demonstrates our commitment to improve return on invested capital."

Ascentia is a partnership including Jim Debonis, the former COO of Beam Wine Estates, WJ Deutsch & Sons and GESD Capital Partners, a San Francisco-based private equity firm.

"We are thrilled with this acquisition," said DeBonis. "These wines are consistently highly-rated and we are confident the brands will flourish in our highly focused portfolio."

As a result of the transaction, the company said it expects to record a pretax loss of approximately $23m or $0.08 diluted earnings per share on a reported basis, which will be excluded from the company's comparable basis earnings per share.

International Wine Associates, the corporate finance and strategic advisory firm that specialises in the wine industry, served as advisor to Constellation.