The transaction is valued at approximately A$290 million. The company will retain approximately 20% of the business and receive cash proceeds of about $230 million, subject to closing adjustments.
The transaction includes virtually all Constellation's Australian, UK, and South African brands, wineries, facilities, vineyards, and the company's 50% interest in Matthew Clark, the UK wholesale joint venture.
The transaction is expected to close by the end of January.
“During the last two years, Constellation has implemented a strategy focused on driving profitable organic growth through premiumising its world class brand portfolio and improving margins, return on invested capital and free cash flow,” said Rob Sands, president and chief executive officer, Constellation Brands.
“The CWAE business sells quality wines from the important Australian appellation and has significant scale, but continues to be faced with challenging market conditions. Therefore, the business is no longer consistent with Constellation's strategy. We believe CHAMP has the requisite skills and motivation necessary for accelerating the success of the CWAE group,” he said.
Constellation says it remains committed to growing its international business and continuing to invest in and drive its premium wine portfolio around the world. In addition to its operations in Canada and New Zealand, the Constellation Wines International organisation is said to increase its focus on selling the company's premium wine portfolio around the world.
Constellation and CHAMP will work together to distribute and supply each other's products globally. Constellation expects that net proceeds will be used to reduce borrowings.
“CHAMP is committed to supporting management in building a competitive and profitable business in the Australian and UK markets and will invest to grow the business,” said CHAMP managing director, John Haddock.
It is believed the divestment will mean E&J Gallo, the still family-owned and managed Californian wine producer, will regain its position as the world’s largest wine producer although Constellation may retain its crown as the biggest premium wine maker.
Constellation Brands portfolio includes Robert Mondavi, Clos du Bois, Blackstone, Arbor Mist, Estancia, Ravenswood, Jackson-Triggs, Kim Crawford, Corona Extra, Black Velvet Canadian Whisky and SVEDKA Vodka.
The CHAMP group has offices in Sydney and Brisbane, Australia and affiliated offices in Singapore and New York. Since inception in 1987, CHAMP and its predecessor funds have invested in more than 70 private equity investments across a broad range of sectors, including media, transport, industrial services, education, retail, agribusiness, health and financial services.
Successfully exited investments include companies such as Austar Communications, United Malt Holdings, Study Group and Bradken. Current CHAMP investments include Manassen Foods, Centric Wealth, Alleasing, Golding Contractors, LCR Group and International Energy Services.
Its investment philosophy is described as “value creation through earnings growth".
The company added: "Prudent leverage is a factor in the business model, however, the real driver of value creation is sustainable earnings growth based on superior management and investment in growth initiatives.”