Constellation offloads to The Wine Group

27 August, 2008
Page 5 
Constellation Brands, the largest wine company in the world, has sold the Almaden and Inglenook Californian wine brands and the Paul Masson winery in Madera, California to The Wine Group for US$134 million cash.

The Californian-based company says it wishes to focus on faster growing faster-growing, higher-margin wines and reduce its borrowings.

"This transaction, when coupled with the recent acquisition of Clos du Bois, the number one super-premium U.S. wine brand, will allow our wine sales forces to focus on selling higher-growth, higher-margin premium wines," said Rob Sands, Constellation Brands president and chief executive officer. "This change also demonstrates our commitment to improve return on invested capital."

Almaden and Inglenook retail for less than $3.00 per 750 ml bottle equivalent. The Mission Bell Winery, also in Madera, will be retained and allows the company to increase premium wine production in California's San Joaquin Valley wine producing region. The company says this winery will also provide wine production services to the Wine Group on a contract basis.

Constellation states: "The impact of this transaction is expected to be slightly dilutive to ongoing reported basis and comparable basis diluted earnings per share for fiscal 2009. The Almaden and Inglenook wine brands are expected to generate approximately $130 million of net sales for fiscal 2008, and represent approximately 10 million nine-litre cases of the company's U.S. wine volume.

"The proceeds from this transaction do not impact free cash flow, and therefore the company's free cash flow guidance for fiscal 2008 remains unchanged at $280 - $300 million".

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