FAIRPORT, N.Y. (AP) - Constellation Brands Inc. is staking a bigger claim in the more profitable end of the U.S. wine market with a deal to add Clos du Bois to its collection of $8 to $11 wines led by Robert Mondavi Private Selection.
The world's biggest winemaker said Monday it is paying $885 million for the U.S. wine business of Fortune Brands Inc.
In addition to top-seller Clos du Bois, the buyout would give Constellation the Wild Horse and Geyser Peak brands, five California wineries and more than 1,500 acres of vineyards in the Napa, Sonoma and Los Carneros grape-growing regions.
Even with its latest acquisition, Constellation will control less than 5 percent of the highly fragmented global wine market. But its share of the American market will expand 1 percent to around 20 percent.
The beer, wine and spirits producer has been snapping up alcoholic-beverage businesses since the 1980s.
'This portfolio is an excellent fit and furthers our strategy of exceeding consumer expectations and expanding our presence in the growing high-end segments of the wine market,' said its chief executive, Rob Sands.
Constellation shares slipped 39 cents, or 1.7 percent, to $22.60 Monday while Fortune Brands shares gained 49 cents to $79.66.
Fortune Brands makes consumer products ranging from Jim Beam bourbon to Moen faucets and Titleist golf equipment and is holding on to its Harveys sherry and Cockburns port brands. The sale will allow the Deerfield, Ill.-based company to focus on its higher-margin liquor business.
Led by Clos du Bois, which accounts for some 2 million cases, the Fortune Brands wines make about 2.6 million cases a year and posted $214 million in revenue last year including excise taxes. Other brands included in the buyout include Atlas Peak, Gary Farrell, XYZin, Buena Vista and J. Garcia.
The sale, expected to close by Dec. 31, is expected to slightly reduce both companies' earnings in 2008. Constellation is financing the deal with debt and said the purchase will add slightly to earnings per share in 2009.
Separately, the company said its Hardy Wine Co. unit in Australia will consolidate winemaking and packaging operations, resulting in $21.9 million in charges.
Constellation produced about 110 million cases of wine last year, or about 4.3 percent of the worldwide volume. The buyout will expand its global share to around 4.5 percent, spokesman Mike Martin said.
Low-cost entry barriers largely explain why ownership in the wine business is so widespread.
'One of the advantages we have is because we have critical-mass volume, we have some economies of scale and also the breadth of distribution that helps us gets more brands to more markets,' Martin said. 'That helps ensure that many of our brands are available just about anywhere a consumer would want to go, whether it's a grocery store, a liquor store or a wine-specialty store.'
Constellation's 300-plus brands run from jug wines to coveted California reds such as Ravenswood and Estancia, beer imports such as Corona and St. Pauli Girl and liquors like Fleischmann's vodka, Skol gin and Black Velvet Canadian whiskey.
In 2003, it acquired Australian vintner BRL Hardy Ltd. for $1.1 billion in cash and stock in a deal that made it the world's largest wine business. It jumped further ahead of longtime wine leader E.& J. Gallo Winery of Modesto, Calif., when it bought Robert Mondavi Corp. for $1.3 billion. Last year, it bought Canada's Vincor International Inc. for nearly $1.1 billion.
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