CANADA: Vincor rejects Constellation advances

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Vincor International has rejected the hostile takeover offer by Constellation Brands.

"After a thorough review, Vincor's board of directors has determined that the C$31 price contemplated in Constellation's approach is inadequate and not in the best interests of shareholders in light of the future earnings prospects for the company and the significant synergies that Constellation would enjoy from acquiring Vincor," the company said in a statement. "These synergies have the potential to double the company's annual EBITDA," it added.

Vincor said that it had established a 'Special Committee of independent Directors' comprised of Michael Bregman, Mark Hilson, Robert Luba and Hugh Segal, to deal with the offer.

The board has also retained BMO Nesbitt Burns and Merrill Lynch as financial advisors.

Vincor said it had advised Constellation that it would be prepared to consider any proposal that accurately includes the company's prospects and reflects the vast synergies an acquirer would realise.

"We view this as an opportunistic and inadequate approach by Constellation," said Mark Hilson, chair of the special committee. "The board and our financial advisors intend to continue to aggressively pursue all alternatives to maximise value for Vincor's shareholders. The initial analysis by management and our independent advisors strongly suggests that Constellation's approach grossly undervalues the growth prospects in Vincor's core business and does not take into consideration the significant synergies that an international wine company like Constellation could achieve."

Hilson said: "The C$31 price per share indication was preceded by a range stated by Constellation of $30 to $34 and, immediately prior to Constellation's news release, a price indication by Constellation of $36 or higher."

"As a result of previously announced efforts to evaluate potential cost savings and profit improvement opportunities throughout its operations, Vincor has identified approximately C$16m in annualised cost savings, C$5m of which will be reflected in the financial results for the current fiscal year," added Donald L. Triggs, president and CEO. "Constellation's approach does not fully value these savings, the momentum of our premium brands and Vincor's projected organic growth."

Vincor also announced that its board of directors has approved the adoption of a limited duration Shareholders Rights Plan. The purpose of the Rights Plan, the company said, is to ensure that the board will have sufficient time to properly develop and pursue all alternatives that could maximise value for Vincor's shareholders.

But Vincor added that the Rights Plan is not intended to prevent take-over bids.

"Those bids that meet certain requirements intended to protect the interests of shareholders are considered under the Rights Plan to be 'Permitted Bids'," the statement said.

The adoption of the Rights Plan is subject to the approval of the Toronto Stock Exchange.

Sectors: Wine

Companies: Constellation Brands

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