Constellation May Sell Some Wine Assets to Australian Vintage Share Business

Nov. 2 (Bloomberg) -- Constellation Brands Inc., the world’s largest winemaker, may sell some assets to Australian Vintage Ltd. in return for a “substantial” equity stake in the maker of McGuigan and Nepenthe wines.

The company is in discussions with “various parties to improve the prospects of its Australian and U.K. businesses,” Victor, New York-based Constellation said in a PR Newswire statement today. Any equity stake in Adelaide-based Australian Vintage would be “non-controlling,” it said.

Constellation, with brands including Hardys, Banrock Station and Leasingham, has been selling Australian vineyards and plants to reduce debt. Winemakers in the country are battling a glut of output, loss of market share to South American producers and a rising currency making exports less competitive in overseas markets.

“The Australian wine industry is facing unprecedented negative operating conditions,” Constellation Chief Executive Officer Rob Sands said in the statement. “This combination would create a more competitive entity better positioned to deal with the current environment.”

Sands said the talks with Australian Vintage are preliminary and may not lead to a transaction. The company didn’t identify any other potential partners.

Foster’s Group Ltd., the largest producer of Australian wine, last month agreed to transfer 13 domestic brands into a venture with Vok Beverages Pty.

Under that agreement, Vok will sell and market brands such as Queen Adelaide, Half Mike Creek and Great Western while Melbourne-based Foster’s continues to produce the wine.