Constellation Brands Inc. of Fairport, N.Y., uncorked a deal Friday to buy Australian winemaker BRL Hardy Ltd. for $1.1 billion, which if completed would knock vintner E. & J. Gallo Winery of Modesto from its perch as the world's largest winemaker by sales.
The transaction would give Constellation -- which markets wines such as Ravenswood, a premium California brand -- a bigger share of Australia's rocketing wine exports. Increased competition from places such as Australia has been a major factor in creating a global glut of wine that has hurt many California wine firms the last few years.
In buying BRL Hardy, one of Australia's top three wine companies, Constellation would see its overall sales swell to $3.2 billion a year and its wine sales to $1.7 billion. Privately held Gallo's wine sales were estimated by analysts at $1.4 billion in 2001. Gallo had no comment on the deal Friday.
The acquisition would raise Constellation's volume sales to at least 69 million cases of wine a year, said Chief Executive Richard Sands.
In 2001, Gallo had the edge in the amount of wine sold, with 63 million cases, while Constellation Brands and BRL Hardy sold a combined 60 million cases, said Frank Walters, director of research at Impact, a leading publisher of alcoholic beverage data.
"Suddenly, you end up with the world's biggest wine company, having strong distribution in the U.K., U.S. and Australian markets, not a lot of overlap in their product range," said Rupert Clifton-Bligh, the investment manager for International Wine Investment Fund, BRL Hardy's largest single shareholder with a 10.5% stake.
Constellation makes refined and low-priced wines, including Arbor Mist, Franciscan, Simi, Almaden, Vendange and Ravenswood.
Aside from wine, its leading U.S. brands include Corona beer, Paul Masson brandy and Black Velvet whiskey.
The company splashed into the big leagues with the 1991 purchase of Guild Wineries and Distilleries Inc. of California, maker of Cook's Champagne, the No. 2 sparkling wine in the U.S. That gave it a foothold in California table wines, the largest segment of the wine business.
Constellation's deal with BRL Hardy, expected to be completed by April, requires the approval of BRL shareholders and regulators.
Constellation shares rose 63 cents to close Friday at $25.40 on the New York Stock Exchange.