Fairport, N.Y., May 22 - Constellation Brands, Inc. has entered into an agreement to sell its Strathmore bottled water business to A.G. Barr p.l.c., the Scottish-based U.K. soft drinks business, for 15 million pounds Sterling. The transaction is expected to close in late May or early June.
Strathmore became part of Constellation's portfolio in 1998 when it acquired U.K. drinks company Matthew Clark plc -- now known as Constellation Europe -- the U.K.'s leading wine company, independent wholesaler to the on-premise channel and a leading cider producer.
"Strathmore is a non-core product for us in a category in which we do not generally compete, and we believe our resources can be better utilized in support of our U.K. beverage alcohol portfolio," stated Richard Sands, Constellation Brands chairman and chief executive officer. "The benefits of owning Strathmore, which largely relate to sales through our U.K. wholesale business, have been protected by an ongoing supply contract with A.G. Barr."
The divestiture is expected to result in a pre-tax loss of approximately 7 million pounds and an after-tax loss of approximately 9 million pounds, or a $0.07 reduction to the company's first quarter and fiscal 2007 diluted earnings per share ("EPS") as reported under generally accepted accounting principles ("reported"). As a result of this transaction, the company also expects its reported fiscal 2007 tax rate to be slightly higher than the 36.5 percent rate previously announced. The divestiture is expected to have an immaterial impact on Constellation's ongoing EPS, both on a reported and comparable basis in future periods.
Due to the anticipated impact on reported earnings, the company is adjusting its reported diluted EPS guidance, as set forth in its April 6, 2006, earnings news release, for the first quarter and full fiscal year 2007, to $0.18-$0.21 and $1.50-$1.58, respectively. The company's comparable diluted EPS guidance for the first quarter and full fiscal year 2007, as set forth in the company's April 6, 2006, earnings news release, is unchanged. Strathmore's total annual net sales and operating income for Constellation's last fiscal year were 12.6 (U.S. GAAP basis) million pounds and 1.3 million pounds, respectively.
Constellation Brands, Inc. is a leading international producer and marketer of beverage alcohol brands with a broad portfolio across the wine, spirits and imported beer categories. Well-known brands in Constellation's portfolio include: Almaden, Arbor Mist, Vendange, Woodbridge by Robert Mondavi, Hardys, Nobilo, Alice White, Ruffino, Robert Mondavi Private Selection, Blackstone, Ravenswood, Estancia, Franciscan Oakville Estate, Simi, Robert Mondavi Winery brands, Stowells, Blackthorn, Black Velvet, Mr. Boston, Fleischmann's, Paul Masson Grande Amber Brandy, Chi-Chi's, 99 Schnapps, Ridgemont Reserve 1792, Effen Vodka, Corona Extra, Corona Light, Pacifico, Modelo Especial, Negra Modelo, St. Pauli Girl, Tsingtao.