Photographer: Brent Lewin/Bloomberg

Constellation Explores IPO for Part of Canadian Wine Business

  • Company owns six of the nation's top 25 table wine brands
  • Move would increase dependence on its expanding beer division

Constellation Brands Inc. is exploring an initial public offering of some of its Canadian wine business, a move that would tilt the beverage company’s remaining brand portfolio even more heavily toward beer.

The evaluation is part of ongoing efforts to create value for shareholders and strengthen the company’s financial profile, Constellation said Wednesday in a statement. A final decision is expected to be made this year, the Victor, New York-based company said.

Splitting off any of its wine portfolio would make Constellation more reliant on beer, a division that it expanded in a major way with the 2013 acquisition of the Corona business in the U.S. and continued with last year’s $1 billion takeover of craft brewer Ballast Point. Constellation, which sells Robert Mondavi, Clos du Bois and Ruffino wines, said last year that it is Canada’s leading wine company. The company owns six of the nation’s top 25 table wine brands, with Jackson-Triggs as the highest-selling label and Inniskillin as the top icewine. Constellation said the enterprise posted strong results in its most recent fiscal year, which ran through February.

“They feel like it’s not being recognized as part of their portfolio,” said Adam Fleck, an analyst at Morningstar Inc. “It fills a nice niche in the wine business, but a lot of the growth in the U.S. is from the premium, high-end portion of the market. If they can position their portfolio more towards that premium, high end, I think they can maybe drive a little better growth."

Prisoner Purchase

In that spirit, Constellation said today it’s buying the Prisoner Wine Co., a maker of super luxury wines including the Saldo and Blindfold brands, for about $285 million. That deal is expected to close by the end of the month.

Constellation also on Wednesday reported fourth-quarter profit rose to $1.19 a share, excluding some items. That topped analysts’ $1.15 average projection. Earnings in the current fiscal year will increase to $6.05 to $6.35 a share, the company said. Analysts estimated $6.11, on average.

The shares rose as much as 4.9 percent to $158.75 in New York. Constellation already had gained 6.3 percent this year through Tuesday.

Fleck said that while he thinks Constellation shares are overvalued, the company has produced solid earnings.

“They’re really on trend with the consumer base in the U.S., and that is evident in the fact that they’re continuing to outpace really the entire industry,” he said.

Before it's here, it's on the Bloomberg Terminal.