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Constellation Brands (STZ) Receives FTC Approval for Gallo Deal
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Constellation Brands Inc. (STZ - Free Report) revealed that the U.S. Federal Trade Commission (“FTC”) has given its approval for the divestiture of a portion of Constellation Brands’ wine and spirits portfolio to E. & J. Gallo Winery through the acceptance of the proposed consent order pact entered on Nov 9. The transaction included the Constellation Brands’ brands priced at $11 retail and below, including certain related facilities located in California, New York, and Washington State. This marks the satisfaction of all necessary antitrust approvals for the transaction.
With the receipt of the FTC approval, the transaction is now expected to be concluded in the week of Jan 4, 2021.
The FTC’s acceptance of the proposed consent order also includes the conclusion of Constellation’s separate but related transactions. These include the divestiture of the Paul Masson Grande Amber Brandy brand, related inventory and interests in certain contracts to Sazerac for $255 million; and certain brands of its grape juice concentrate business to Vie-Del Company. It also covers the company’s agreement to divest certain brands used the New Zealand-based Nobilo Wine brand and related assets to Gallo for $130 million. These transactions are now expected to be concluded nearing the completion of the aforesaid transaction with Gallo.
The Background
Originally, Constellation Brands agreed to divest nearly 30 low-end brands from its wine & spirits portfolio, priced at or below $11 per bottle, to E. & J. Gallo Winery for $1.7 billion. The contract also included the divestiture of related facilities in California, New York and Washington.
On Dec 13, 2019, the companies revised the terms of the deal based on FTC’s competitive concerns related to the Sparkling Wine, Brandy, Dessert Wine and Concentrate categories. The revised adjusted deal value was worth $1.1 billion, of which $250 million was an earnout on the divested brand performance in a two-year period after the closure of the deal. As part of the revised terms of the transaction, brands like Cook’s California Champagne, J. Roget American Champagne and Paul Masson Grande Amber Brandy were excluded from the deal.
Simultaneously, in a separate but related deal, the Corona brewer entered an agreement with E. & J. Gallo to divest its New Zealand-based Nobilo Wine brand and related assets worth $130 million.
The terms of the deal were further revised in May 2020 to exclude Constellation’s Mission Bell facility and certain related real estate, equipment, contracts, and employees from the transaction. The revised agreement also supported Constellation’s production needs after it decided to retain Cook’s California Champagne and J. Roget American Champagne. Excluding the Mission Bell facility and related assets, the deal’s price was adjusted to $1.03 billion. Of this, about $250 million is an earnout if brand performance provisions are met over a two-year period after closing.
Conclusion
The aforesaid deal demonstrates Constellation Brands’ commitment to revive the performance of its wine & spirits business. The sale of the low-end brands will help it concentrate on more lucrative premium wine & spirits brands, which should enhance returns and shareholder value. The company expects to use the proceeds from the transaction to reduce debt.
Lately, its wine & spirits premiumization strategy is playing out well, as evident from accelerated growth for the Power Brands and strong margin performance in second-quarter fiscal 2021. Notably, the company’s higher-end wine power brands outpaced the U.S. high-end wine category in IRI channels. This growth was led by gains in Kim Crawford, Meiomi and The Prisoner Brand Family, all of which reported double-digit growth in IRI channels.
Additionally, the company is making investments to fuel growth of its power brands through innovation, capitalizing on priority, consumer trends, with successful product introductions. Some of the recently introduced products include the Prisoner Cabernet Sauvignon and Chardonnay varietals, SVEDKA and High West ready-to-drink cocktails, Ruffino wine spritzer and Meiomi Cabernet Sauvignon.
Shares of the leading alcohol company have gained 14.6% in the past year against the industry’s decline of 6.6%. The company currently carries a Zacks Rank #3 (Hold).
Carlsberg A/S (CABGY - Free Report) has a Zacks Rank #2. The Zacks Consensus Estimate for its 2021 sales and earnings indicates a rise of 7.6% and 14.6%, respectively, from the year-ago period’s reported levels.
Molson Coors Beverage Company (TAP - Free Report) , also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 3.7%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Bigstock
Constellation Brands (STZ) Receives FTC Approval for Gallo Deal
Constellation Brands Inc. (STZ - Free Report) revealed that the U.S. Federal Trade Commission (“FTC”) has given its approval for the divestiture of a portion of Constellation Brands’ wine and spirits portfolio to E. & J. Gallo Winery through the acceptance of the proposed consent order pact entered on Nov 9. The transaction included the Constellation Brands’ brands priced at $11 retail and below, including certain related facilities located in California, New York, and Washington State. This marks the satisfaction of all necessary antitrust approvals for the transaction.
With the receipt of the FTC approval, the transaction is now expected to be concluded in the week of Jan 4, 2021.
The FTC’s acceptance of the proposed consent order also includes the conclusion of Constellation’s separate but related transactions. These include the divestiture of the Paul Masson Grande Amber Brandy brand, related inventory and interests in certain contracts to Sazerac for $255 million; and certain brands of its grape juice concentrate business to Vie-Del Company. It also covers the company’s agreement to divest certain brands used the New Zealand-based Nobilo Wine brand and related assets to Gallo for $130 million. These transactions are now expected to be concluded nearing the completion of the aforesaid transaction with Gallo.
The Background
Originally, Constellation Brands agreed to divest nearly 30 low-end brands from its wine & spirits portfolio, priced at or below $11 per bottle, to E. & J. Gallo Winery for $1.7 billion. The contract also included the divestiture of related facilities in California, New York and Washington.
On Dec 13, 2019, the companies revised the terms of the deal based on FTC’s competitive concerns related to the Sparkling Wine, Brandy, Dessert Wine and Concentrate categories. The revised adjusted deal value was worth $1.1 billion, of which $250 million was an earnout on the divested brand performance in a two-year period after the closure of the deal. As part of the revised terms of the transaction, brands like Cook’s California Champagne, J. Roget American Champagne and Paul Masson Grande Amber Brandy were excluded from the deal.
Simultaneously, in a separate but related deal, the Corona brewer entered an agreement with E. & J. Gallo to divest its New Zealand-based Nobilo Wine brand and related assets worth $130 million.
The terms of the deal were further revised in May 2020 to exclude Constellation’s Mission Bell facility and certain related real estate, equipment, contracts, and employees from the transaction. The revised agreement also supported Constellation’s production needs after it decided to retain Cook’s California Champagne and J. Roget American Champagne. Excluding the Mission Bell facility and related assets, the deal’s price was adjusted to $1.03 billion. Of this, about $250 million is an earnout if brand performance provisions are met over a two-year period after closing.
Conclusion
The aforesaid deal demonstrates Constellation Brands’ commitment to revive the performance of its wine & spirits business. The sale of the low-end brands will help it concentrate on more lucrative premium wine & spirits brands, which should enhance returns and shareholder value. The company expects to use the proceeds from the transaction to reduce debt.
Lately, its wine & spirits premiumization strategy is playing out well, as evident from accelerated growth for the Power Brands and strong margin performance in second-quarter fiscal 2021. Notably, the company’s higher-end wine power brands outpaced the U.S. high-end wine category in IRI channels. This growth was led by gains in Kim Crawford, Meiomi and The Prisoner Brand Family, all of which reported double-digit growth in IRI channels.
Additionally, the company is making investments to fuel growth of its power brands through innovation, capitalizing on priority, consumer trends, with successful product introductions. Some of the recently introduced products include the Prisoner Cabernet Sauvignon and Chardonnay varietals, SVEDKA and High West ready-to-drink cocktails, Ruffino wine spritzer and Meiomi Cabernet Sauvignon.
Shares of the leading alcohol company have gained 14.6% in the past year against the industry’s decline of 6.6%. The company currently carries a Zacks Rank #3 (Hold).
Key Beverage Stocks to Watch
The Boston Beer Company, Inc. (SAM - Free Report) delivered an earnings surprise of 23.1%, on average, in the trailing four quarters. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Carlsberg A/S (CABGY - Free Report) has a Zacks Rank #2. The Zacks Consensus Estimate for its 2021 sales and earnings indicates a rise of 7.6% and 14.6%, respectively, from the year-ago period’s reported levels.
Molson Coors Beverage Company (TAP - Free Report) , also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 3.7%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
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