Constellation Brands has sold half of its Matthew Clark wholesale business in the UK.

The drinks company confirmed today (17 April) that it expects to receive approximately GBP85m (US$168m) from the sale, which will see Matthew Clark become a joint venture with Punch Taverns.

Punch will pay GBP35m for the stake, with the remaining GBP50m coming primarily from the issuance of debt by the joint venture.

Under the terms of the arrangement, Constellation Europe and Punch Taverns will provide equal representation on a new holding company board. On a day-to-day basis the business will continue to be run by the current management team, headed up by Steve Thomson, the current managing director of Matthew Clark Wholesale.

"Our joint venture with Punch Taverns is an innovative drinks distribution initiative that will transform the business to one with a focus on providing improved service and an unequalled portfolio of drinks options to on-premise customers," said Rob Sands, Constellation Brands' president and COO. "Given the importance of the UK on-premise drinks business, this joint venture helps assure that Matthew Clark, its customers and, most important, consumers can benefit from distribution efficiency gains and expanded beverage offerings. We believe this collaboration will establish a new benchmark for wholesale drinks distribution in the UK and it should result in additional long-term growth for Matthew Clark."

When contacted by just-drinks today, a spokesperson for Constellation said the deal was a positive for Matthew Clark, Punch and for Constellation. "The heightened investment being put forward will help reinvigorate the business for Matthew Clark," the spokesperson said. "Punch, meanwhile, will be able to offer more choice for retailers, as well as use of such systems as Constellation's wine export portfolio.

"Constellation is primarily a producer and marketer of alcoholic drinks," the spokesperson continued. "They're not a dedicated wholesaler and distributor, so Matthew Clark is a non-core business. The company also gets GBP85m from the move."

Matthew Clark currently operates in the region of 20,000 accounts across the UK on-trade, including the Marriot and Hilton hotel chains. "The business does not currently hold that many Punch accounts, so that is obviously an opportunity," the spokesperson noted.

As a result of the move, Constellation has downgraded its fiscal 2008 diluted earnings per share by US$$0.05 per share to between $1.16 and $1.26. The company's full-year adjusted earning outlook, however, remains unchanged at between $1.30 and $1.40.