Constellation Brands Reports Wine Deal, Upbeat Results

Constellation Brands Inc. on Wednesday said it agreed to acquire the Prisoner Wine Co. portfolio of brands from Huneeus Vintners and is weighing a spinoff of its Canadian wine business.

The company also posted better-than-expected results for its final quarter and gave upbeat guidance for the current year as acquisitions continue to provide a boon for the beer and wine distributor.

Shares added 3.9% to $157.25 in premarket trading. Constellation also raised its dividend 29% to 40 cents a share.

Constellation became the third-largest beer company by volume in the U.S. in 2013 after acquiring rights to Corona and Modelo from Anheuser-Busch InBev NV. In November, Constellation said it would acquire craft-beer company Ballast Point Brewing & Spirits amid a wider consolidation push in the beer industry.

Constellation said the expected $285 million cash deal for Prisoner will add five "highly rated wine brands that have grown volumes at an annual rate of 30% over the last three years."

Chief Executive Rob Sands said the acquisition will help the company capitalize on U.S. market trends that favor high-end wine brands while strengthening its position in the "margin enhancing super-luxury wine category."

The deal, slated to close by the end of the month, is expected to add 3 cents to 5 cents to the company's earnings this year.

Including the recent acquisitions of Ballast Point and California wine brand Meiomi, as well as Prisoner, Constellation guided for fiscal 2017 earnings of $6.05 to $6.35 a share. Analysts forecast earnings of $6.11 a share, according to Thomson Reuters.

Meanwhile, Constellation said it is evaluating an initial public offering for a portion of its Canadian wine business, whose value Mr. Sands said "is not being recognized." He said the business in Canada delivered "excellent" financial results in fiscal 2016, outperforming the industry and gaining market share.

"An IPO will create better visibility to this dynamic part of the business," Mr. Sands said, adding a decision will be made later this year.

In the latest quarter, Constellation's net beer sales rose 18% on volume growth and favorable pricing, while sales in the wine and spirits segment climbed 4% on a constant currency basis.

Over all for the quarter ended in February, Constellation reported a profit of $243.4 million, or $1.19 a share, up from a profit of $214.6 million, or $1.06 a share, a year earlier. Revenue jumped 14% to $1.54 billion from $1.36 billion, helped by acquisition benefits from Meiomi and Ballast Point.

Analysts surveyed by Thomson Reuters were looking for earnings of $1.14 a share on $1.52 billion in sales.

During the fourth quarter, the company repurchased about 246,000 shares for $34 million.

Write to Anne Steele at [e-mail]

(END) Dow Jones Newswires

April 06, 2016 09:05 ET (13:05 GMT)

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