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Constellation Buys Vincor for $1.3 Billion

Brands such as Toasted Head and Kim Crawford likely to benefit from marketing prowess of world's biggest wine company

Eric Arnold
Posted: April 3, 2006

Constellation Brands, the world's largest wine company, has reached an agreement to buy Canadian wine giant Vincor International. The deal is worth $1.31 billion (CAN$1.52 billion at CAN$36.50 per share), roughly the same price Constellation paid to acquire Robert Mondavi Corp. in 2004.

Constellation originally offered to buy Vincor in September of last year for CAN$1.4 billion (at CAN$31 per share), but the offer was quickly rejected. At the time, Vincor executives said that the offer did not fairly represent the value of the company, which sells roughly 20 million cases a year worldwide, or the strength of its brands, which include Hogue Cellars in Washington, Kim Crawford in New Zealand, R.H. Phillips in California and renowned Canadian ice wine producer Inniskillin. Other offers from Constellation followed, but each was rejected as quickly as the first. Both companies claim, however, that as they resumed negotiations over the next few months, they found their corporate cultures, philosophies and goals to be closely aligned.

"It's a positive outcome for all of our stakeholders," said Vincor CEO Don Triggs in a conference call to investors. The agreed-upon sum is a 55.5 percent increase in Vincor's closing share price just prior to Constellation's initial offer and a 15.9 percent premium on the closing share price at the end of last week.

As a term of the acquisition, Vincor will continue to be run as a separate entity within Constellation, but will benefit from the Canadaigua, N.Y.-based corporation's marketing, distribution and financial prowess around the world, particularly in the United States. The growth of the Kim Crawford brand, for example, "has been limited only by grape supply," said Constellation CEO Richard Sands in a conference call to investors. Another wine poised for growth under the deal is Toasted Head Chardonnay, said Triggs. He added that he expects "Constellation to drive incremental growth" of that brand in the United States.

Both companies expect to have the deal finalized quickly, with a shareholder vote scheduled for June 1.

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