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Constellation sells part of its business

Constellation Brands, the global premium wine company, is to sell its Australian and UK business, (Constellation Wines Australia and Europe), to CHAMP Private Equity of Sydney, Australia.

The transaction is valued at approximately A$290m. The company will retain an approximate 20% interest in the business and receive cash proceeds of about $230m, subject to closing adjustments. The transaction, which is expected to close by the end of January 2011, includes virtually all Constellation's Australian, UK, and South African brands, wineries, facilities, vineyards, and the company's 50 percent interest in Matthew Clark, the UK wholesale joint venture. All employees will transfer with the business.

"During the last two years, Constellation has implemented a strategy focused on driving profitable organic growth through premiumizing its world class brand portfolio and improving margins, return on invested capital and free cash flow," said Rob Sands, president and chief executive officer, Constellation Brands. "The CWAE business sells quality wines from the important Australian appellation and has significant scale, but continues to be faced with challenging market conditions. Therefore, the business is no longer consistent with Constellation's strategy. We believe CHAMP has the requisite skills and motivation necessary for accelerating the success of the CWAE group."

Constellation remains committed to growing its international business and continuing to invest in and drive its premium wine portfolio around the world. In addition to its operations in Canada and New Zealand, the Constellation Wines International organization will increase its focus on selling the company's premium wine portfolio around the world.  Constellation and CHAMP will work together to distribute and supply each other's products globally.
Constellation expects that net proceeds will be used to reduce borrowings. Any after-tax gain or loss recognized in connection with this transaction will be excluded from the company's comparable basis diluted earnings per share (EPS). The impact of this transaction is expected to be neutral to ongoing reported basis and comparable basis diluted EPS for fiscal 2011 and neutral to slightly dilutive for fiscal 2012.

"CHAMP is committed to supporting management in building a competitive and profitable business in the Australian and UK markets and will invest to grow the business," said CHAMP MD, John Haddock.
 "I extend my sincerest appreciation to the talented CWAE employees for their outstanding efforts over the years, in particular for producing some of the best Australian wines and maintaining a leadership position in the U.K., the #1 wine import market," Sands said.

About Constellation Brands
Constellation Brands is the world's leading premium wine company that achieves success through an unmatched knowledge of wine consumers, storied brands that suit varied lives and tastes, and talented employees worldwide. With a broad portfolio of widely admired premium products across the wine, beer and spirits categories, Constellation's brand portfolio includes Robert Mondavi, Hardys, Clos du Bois, Blackstone, Arbor Mist, Estancia, Ravenswood, Jackson-Triggs, Kim Crawford, Corona Extra, Black Velvet Canadian Whisky and SVEDKA Vodka.

1 January 2011 - Felicity Murray