Constellation's sale in Canada includes brands such as Jackson-Triggs.
Constellation Brands has agreed to sell its Canadian wine business for CAD 1.03 billion ($790 million), replacing it with a $120 million move for Charles Smith Wines’ collection of super-premium wines south of the border.
The sale of Constellation’s wine business to Ontario Teachers’ Pension Plan – the largest single-profession pension plan in Canada – includes brands such as Jackson-Triggs and Inniskillin; a number of facilities, including wineries, vineyards and offices; and the Wine Rack retail chain, which operates over 160 wine boutiques throughout Ontario.
The value of the transaction represents roughly 12 times the pre-tax earnings of Constellation’s Canadian wine division, and will allow the New York-based company to upgrade its wine portfolio and expand into the higher-end portion of the market.
Constellation Brands president and chief executive officer Rob Sands said: “In April, we announced plans to explore an initial public offering for a portion of our Canadian wine business as part of our strategy to focus on premium, high-margin and high-growth brands. We seized the opportunity to sell the entire business in a value-enhancing transaction when it presented itself. The Canadian wine business is the leader in the Canadian wine market and is a long-term growth opportunity. Ontario Teachers’ Pension Plan is well-respected with a proven track record for supporting and growing their investments, so we know the business will be in good hands.”
The acquisition won’t affect Black Velvet whisky, which will continue to be owned by Constellation and produced at its facility in Lethbridge, Alberta.
At the same time, Constellation has announced that it will acquire US-based Charles Smith Wines’ collection of ultra-premium wines for approximately $120 million. The transaction, expected to close in October, includes Kung Fu Girl riesling, Velvet Devil merlot, Boom Boom! syrah, Eve chardonnay and Chateau Smith cabernet sauvignon.
The acquisition will ‘solidify’ Constellations’ position as a supplier of Washington state wines; the company said that the brands involved ‘have strong consumer affinity and demand, and have shown double-digit volume growth over the last three years’.
Charles Smith, who started the core collection of wines in 2006, will assist Constellation Brands under a consultancy agreement to maintain the quality and consistency of the wines, and will work with the company to help drive further innovation across its wine portfolio.
Bill Newlands, president of Constellation’s wine and spirits division, claimed that Smith’s expertise was an asset to the business.
He said: “Charles Smith is a visionary in the wine business and we are excited to welcome him to Constellation Brands and bring these wines to a larger audience. With the addition of this collection, we strengthen our core wine portfolio and augment our innovation capabilities to stay ahead of consumer trends. I am looking forward to working with Charles and tapping into his creative genius to fuel our wine innovation.”
And Charles Smith said: “I created Charles Smith Wines so that everyone could experience a great tasting, quality wine, at an affordable price. The quality of grapes in Washington state is incredible, and I have been able to put the best wines I can in a bottle for people to enjoy. Constellation Brands has a proven track record of acquiring and working with brands and companies to help them reach the next level. With Constellation Brands, we now have the opportunity to share these wines with the world.”
It follows the completion of Constellation’s acquisition for High West Distillery, announced earlier this month, for a reported $160 million.
With High West, which has experienced double-digit volume growth for the past three years, Constellation has entered the dynamic and profitable high-end craft whiskey segment. Additionally, as part of the company’s venture activity, it recently acquired a minority stake in Bardstown Bourbon Company.
“Investing in Bardstown, the largest new whiskey distillery in the US, jumpstarts our opportunity to further explore innovation in the brown spirits category,” said Sands. “With the acquisition of High West and the opportunity to work with Bardstown Bourbon Company, we are strategically advancing our spirits business with access to high-quality supply and state-of the-art production capabilities.”
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