CANADA: Vincor potential suitors named

An analyst has suggested the names of other suitors mulling an improved bid for Vincor. The Canadian-based wine company maintains that last week's bid by Constellation of C$31 per share is too low, and said that it is waiting for improved bids from elsewhere.

In a recent research note, National Bank Financial analyst James Durran said that he believes Foster's, E&J Gallo, Pernod Ricard, Diageo and The Wine Group to be the most likely other bidders.

Durran also suggested that Constellation's recent acquisitions show it will "partly pay up for synergies if the target is compelling enough." He also highlighted speculation that Constellation needs to complete another large acquisition to "mask its poor organic growth" from its Robert Mondavi Corp. purchase, completed late last year.

Durran said that, at 12.6 times enterprise value (EV) to earnings before interest taxes depreciation and amortisation (EBITDA), Constellation's multiple is lower than 15.6 times EV/EBITDA for Constellation's Mondavi purchase.

He added, however, that the multiple is "in-line with the historical industry average."

In a presentation on Vincor's Website, the company says that the average of three recent transactions in the industry - Foster's purchase of Southcorp; Diageo's purchase of Chalone, and Constellation's purchase of Mondavi - were completed at an earnings multiple of 16.7 times. The company feels, therefore, that Constellation's multiple for Vincor is inadequate.