Constellation completes "value" spirits business sale

Constellation Brands has completed the sale of its "value" spirits business to Sazerac Co for a total of US$334m.

Constellation said today (25 March) that it would use the $210m net cash proceeds from the deal to help repay debt.

The California wine giant, which also today announced a plan to cut 5% of its global workforce, agreed the spirits sale to family-owned Sazerac back in January.

The value spirits portfolio 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.

"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, after agreeing the sale in January.

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

However, to achieve synergies and operating efficiencies, the company said today that it will consolidate the retained premium spirits business into its North American wine operations.

Sands said: "The company's US spirits business continues to experience strong growth rates driven by sales of Svedka Vodka."

Constellation also cut guidance for underlying earnings per share for its fiscal 2009 to a range of US$1.6 - $1.62. Previous guidance allowed for a range of $1.68 - $1.72, for the 12 months to the end of February 2009.

Poorer than expected performances in the UK and Australia are to blame for the move, said the group, which will report its full-year earnings on 8 April.