Constellation Brands has lined up the sale of most of its spirits business, which consists of over 40 different brands, to Sazerac Company.

The US-based drinks company said today (12 January) that it will divest of its "value" spirits portfolio, which includes Barton, Skol, Mr. Boston, Fleischmann's, the 99 schnapps line, the di Amore line, Chi-Chi's pre-mixed cocktail line and Montezuma Tequila, to the family-owned wine and spirits firm for US$334m.

The transaction, which is subject to routine and customary regulatory review, is expected to close by the end of next month.

Total volume sales for the brands being sold - which represent over 600 SKUs - was more than 10m cases for fiscal year 2008, with net sales for the divested brands totalling around $200m. Distillery and bottling facilities included in the sale are located at Bardstown and Owensboro, Ky., as well as a leased bottling facility at Carson, Calif. Constellation will retain its distillery and production facility at Lethbridge, Alberta, Canada.

"This transaction is consistent with our strategic focus on premium, higher-growth and higher-margin brands in  our portfolio, and allows us to continue the process of reducing debt, generating free cash flow, creating efficiencies and increasing ROIC," said Constellation's president and CEO, Rob Sands. "With the proceeds from asset sales, along with our targeted free cash flow for fiscal 2009, we now expect our debt to comparable basis EBITDA ratio to approximate four times by the end of the current fiscal year, which underscores the effectiveness of our focus on cash flow generation."

Constellation will retain spirits brands including Svedka vodka, Black Velvet Canadian whisky and Paul Masson Grande Amber Brandy.

"Totalling almost 5m cases, the three principal spirits brands we are retaining have scale in the marketplace, good margins, are at mid-premium price points and continue to grow ahead of their respective categories," said Sands. "These are exactly the type of scale brands that fit well within Constellation's portfolio strategy, which is focused on well-known, trusted premium brands that represent good value to consumers."

The company is expecting a pre-tax reported loss from the transaction in the region of $11m. Constellation is subsequently adjusting its fiscal 2009 reported diluted EPS guidance to $0.45 - $0.49, from its previous reported diluted EPS guidance of $0.65 - $0.69.