Constellation Explains Details of Its Exit From Australia

Leasingham and Stonehaven winery facilities are sold to other buyers as U.S. wine giant finalizes deal with Aussie investors
Jan 4, 2011

Constellation Brands revealed more details of its $290 million deal to sell its Australian and U.K. wine divisions to an Australian private equity fund today. Company officials tell Wine Spectator that the deal with CHAMP should be completed by mid-February and that the sale will not affect sales and distribution of the brands globally. The officials also revealed that two well-known wineries were not included in the sale, but will instead be sold to other buyers.

The historic Leasingham winery facility in South Australia’s Clare Valley is being sold to local winemaker Tim Adams, while the Limestone Coast-based Stonehaven winery facility is to be taken over by the family-owned Australian Wine Equities. None of the parties would disclose the price of the two deals.

Constellation paid $1.1 billion for Aussie powerhouse BRL Hardy in 2003, one of several big acquisitions the company made in the early part of the decade. Along the way, Constellation built a huge debt, which has been exacerbated by the bad economy. Faced with a strong Australian dollar, high grape costs, duty increases and retailer consolidation, Constellation sought to slash costs in August 2008 by laying off 350 employees and dumping assets. Three wineries and about 2,500 acres of vineyards in the Clare Valley, McLaren Vale and the Limestone Coast were placed on the market at the time. More than 60 percent of the vineyards were sold, others were ripped out, and the Goundrey winery in Western Australia’s Mount Barker region was sold, but the company had difficulty finding buyers for Leasingham and Stonehaven.

Constellation finalized deals to sell the two wineries last month, in the lead up to signing an agreement with CHAMP. Constellation will retain both brands—the buyers will use the facilities as contract wineries. Adams plans to use Leasingham to launch a new brand to support a charity, named Mr Micks, in honor of longtime Leasingham winemaker Mick Knappstein, Adams’ mentor when he first started his training at the winery in 1975. Constellation Wines Australia president Troy Christensen said in a statement that it was great to see the winery going to someone who had such a strong connection.

Adams is looking forward to the challenge of resurrecting the landmark property. “It’s going to be very tough and we are risking all we have achieved to have a crack at this, but I couldn’t stand the thought of this facility being bulldozed and sold off to build housing,” he said.

Australian Wine Equities is a new private equity group. The members are unknown, but director Peter Hislop-Speers told an Adelaide newspaper that it represents "families with extensive background in wine in Australia." He added that they hoped to reopen the winery soon and establish several brands for export, with a focus on China.

Constellation’s Group Public Relations Manager, Anita Poddar, said that the sales of the two wineries and of an 80 percent share of Constellation’s Australian and U.K. divisions to CHAMP would have no effect on the company’s brands and distribution. “The arrangement is that existing portfolios and distribution channels will remain unchanged in the U.S., Australia and Europe,” she said.

Constellation’s transaction with CHAMP includes virtually all of its Australian, U.K. and South African brands, but does not include the company’s U.S. export label, Alice White, which was owned by Constellation prior to its takeover of BRL Hardy in 2003. CHAMP, a private equity fund, appears to be new to the wine industry and has not yet commented on its plans for the brands.

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