Constellation, which had been shopping the brands since last fall and hoped to get $3 billion for the sales, said the plan better aligns its portfolio “with consumer premiumization trends.”
According to Joseph E. Gallo, chief executive of the family-owned company, the deal is “a tremendous opportunity…to bring new consumers into the wine category. We will continue to provide our customers and consumers with quality products at every price point.”
Investing in Cannabis
Constellation Brands President and CEO Bill Newlands championed the company’s $4 billion investment in Canadian cannabis company Canopy Growth Corp., and is expected to use at least some of the $1.7 billion from the sale of Clos du Bois, Mark West, Wild Horse and Estancia among other brands, to pay down that debt.
The sale to E. & J. Gallo also includes four wineries in California, one in Washington State and another in what has long been Constellation Brands’ headquarters, Canandaigua, New York, in the Finger Lakes region.
The deal, which still needs regulatory approval, is expected to close by the end of the Constellation Brands’ fiscal first quarter of 2020. Neither Gallo nor Constellation Brands mentioned any job cuts in the announcements.
The sale of roughly 40% of the company’s wine portfolio means that the maker of Corona, Modelo and Pacifico beers will still retain The Prisoner Wine Company, Kim Crawford, Robert Mondavi, SIMI and Mount Veeder Winery as well as SVEDKA Vodka, High West Whiskey and Casa Noble Tequila.
Constellation’s shares, which closed up 1.7% at $179.69, were down 0.75% at $178.34 after hours.
Constellation Brands will hold its annual earnings conference call on Thursday, April 4.