Constellation to buy wine portfolio for $885 million

Constellation Brands Inc. said Monday that it planned to buy the U.S. wine business of Fortune Brands Inc. for $885 million, in a move to expand its portfolio of higher-end California wines.

The acquisition, which is expected to close by Dec. 31, includes annual sales of 2.6 million cases of wine under brands such as Clos du Bois, Geyser Peak and Wild Horse. It also includes more than 1,500 acres of vineyards in Napa, Sonoma and Carneros, Calif., and five wineries.

D.A. Davidson analyst Timothy Ramey estimated the vineyards alone could have an asset value of $350 million to $400 million.

He also guessed that Fairport, N.Y.-based Constellation might sell some vineyards and then lease them back, as it did when it acquired Robert Mondavi.

“We like the wine business, and the Clos du Bois brand, which accounts for about 2 million of the total 2.6 million cases, is a gem,” Ramey wrote in a research note.

“We believe Constellation’s distribution will further leverage this great brand and there will be revenue synergies as well as cost synergies,” Ramey said.

The world’s largest winemaker, whose California brands include Ravenswood, Robert Mondavi and Simi, also said it would consolidate parts of its Hardy Wine Co. business in Australia, which has suffered recently from a severe drought.

Wine sales in the U.S. are being aided by a shift in consumer tastes away from beer toward wine and spirits.

UBS analyst Kaumil Gajrawala called the deal a positive because super-premium wine brands such as Clos du Bois were growing faster than the wine industry as a whole.