Constellation Brands sells off Canadian business

Constellation Brands has sold its Canadian business to an Ontario-based teachers’ pension plan for CAN$1 billion.

The sale of its Canadian business includes Canadian wine brands such as Jackson-Triggs and Inniskillin, wineries, vineyards, offices, facilities, and Wine Rack retail stores. Constellation Brands will retain ownership of Black Velvet Whisky and its production facility in Lethbridge, Alberta, Canada.

Rumours began earlier this month that the company had been preparing to offload its interests in Canada, as previously reported by the drinks business. 

Constellation’s chief executive, Robert Sands, said earlier this year that he had been considering the potential of an initial public offering (IPO) for its Canadian business, which it acquired in 2006.

However that did not materialise after it became clear that there were buyers keen to buy the business.

“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”, said Rob Sands, president and chief executive officer of Constellation 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 Ontario Teachers’ Pension Plan is the largest single-profession pension plan in Canada.

The sale, worth CAN$1.03bn, follows an agreement for Constellation to purchase Charles Smith Wines for $120 million, expanding its footprint in Washington State.

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.

“With this acquisition, Constellation Brands will solidify its position as the second leading supplier of Washington State wines, gaining a collection of high quality wines that have strong consumer affinity and demand, and have shown double-digit volume growth over the last three years”, the company said in a statement.

Prior to this, Constellation confirmed its purchase of Utah-based High West Distillery, which produces a range of American straight whiskeys.

“With High West, which has experienced double-digit volume growth year over year for the past three years, Constellation Brands enters the dynamic and profitable high-end craft whiskey segment”, it said.

Adding to its recent flurry of activity, Constellation also recently acquired a minority stake in Bardstown Bourbon Company, one of the biggest new whiskey distilleries to have opened in the US, furthering its exploration of the brown spirits category.

“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”, said Sands.

The sale of its Canadian business is subject to regulatory approval but is expected to close by the end of the calendar year.