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Constellation considering Canadian wine IPO

Company plans to buy California's Prisoner Wine Co. portfolio


Reuters — Constellation Brands said on Wednesday it was considering taking a part of its Canadian wine business public and reported better-than-expected quarterly net sales, helped by strong demand for its premium Corona and Modelo beers.

Shares of the New York-based wine, beer and spirits company, which forecast full-year profit largely above estimates, rose as much as 4.88 per cent to a record high of $158.75 in early morning trading (all figures US$).

CEO Rob Sands said the full value of the Canadian wine business, which delivered “excellent overall financial results” in 2016, was not being recognized.

Sands said an IPO would create better visibility and that the company expected to take a final decision later this year.

Constellation produces the Jackson-Triggs and Inniskillin wine brands in Canada, where it operated eight wineries in Ontario, British Columbia and New Brunswick as of February last year.

The company, whose Canadian holdings also include the Black Velvet whisky distillery at Lethbridge, Alta., is trying to separate the consistently growing Canadian wine business from its counterpart in the U.S., CLSA analyst Caroline Levy told Reuters.

An increase in the Hispanic population in the U.S. has spurred demand for Modelo Especial and Corona, premium Mexican beer brands which have also won over other U.S. consumers.

Net income attributable to the company rose 13.4 per cent to $243.4 million, or $1.19 in the fourth quarter ended Feb. 29, beating average analysts estimates of $1.14, according to Thomson Reuters I/B/E/S.

Net sales rose 13.8 per cent to $1.54 billion, topping estimates of $1.52 billion.

Constellation also said it will acquire The Prisoner Wine Company’s portfolio of brands for about $285 million in cash from Huneeus Vintners, a fine wine company.

The deal for the California company’s portfolio is expected to close by the end of April and add about three to five cents to earnings per share in the year ending February 2017.

Constellation is paying a lot for acquisitions to add premium brands, Levy said.

“The consumer is moving upscale, the consumer wants specialtly and premium brands.”

The company also forecast earnings of $6.05-$6.35 per share for the year, largely above analysts’ average expectation of $6.11.

Reporting for Reuters by Subrat Patnaik and Sruthi Ramakrishnan in Bangalore.

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