Beverage heavyweight (think Corona and Modelo), Constellation Brands Inc (STZ.N) has been making news all summer with their heavy investment in marijuana as well as cuts elsewhere in the company. A new report from Reuters contends that trend is only beginning, specifically reporting that Constellation’s shakeup is still underway with plans to sell off their US wine assets in the works.
The article cited four sources who leaked that Goldman Sachs is assisting in the proposed sale. The $3 billion deal would spin off labels including Clos du Bois, Mark West, Arbor Mist and Cooks.
“We continue to focus on driving growth organically and through acquisition and innovation at the higher end of our wine & spirits portfolio, which has consistently grown three- to four-times the U.S. market rate,” a Constellation spokesman told Reuters in an emailed statement. “We are also considering a variety of potential actions to optimize value at the low end of our portfolio, so we can direct our growth efforts and investment dollars more fully towards our focus brands.”
Prominent among those “focus brands” is Canopy Growth, a large, Canadian medical marijuana provider. In August, Constellation spent $4 billion (US) to increase their existing stake in Canopy from 9.9% to 38%. Constellation purchased 104.5 million shares directly from Canopy Growth at a price of C$48.60 per share. In addition, Constellation exercised previously held warrants and received new warrants that would allow the company to purchase a 50% share moving forward.
Sweeping changes are not out of character for Constellation. Just last week, the company announced that its chief executive of 11 years, Rob Sands, will conclude his tenure in March, with President and Chief Operating Officer Bill Newlands taking the helm. Likewise, the summer re-up on cannabis was accompanied by layoffs of entire craft beer sales team. There is even precedent for the wine sales; in 2016, the conglomerate’s Canadian wine portfolio was old to the Ontario Teachers’ Pension Plan for about C$1.03 billion ($775 million).
Constellation is a goliath in the booze industry. Their wine portfolio features dozens of brands (for now, at least) including Ravens Wood, The Prisoner, Black Box, Ruffino, and Close du Bois. On the beer end, Constellation owns Modelo, Corona, Pacifico, Tocayo, and Victoria. Paul Masson, High West, Svedka, and Casa Noble are amongst their liquor holdings. Based in Victor, NY, Constellation is an international corporation employing over 9000 people and trading on the New York Stock Exchange (NYSE) under the symbol STZ.
Canopy Growth is one of the largest marijuana producers in the world, boasting a two billion dollar market cap. The corporation’s holdings include Tweed, a massive Ontario retailer; Spectrum Cannabis, a medical marijuana division; and Bedrocan Canada, the offshoot of a famed Dutch medical THC lab and grower. Canopy trades on the Toronto Stock Exchange (TSX) under the symbol WEED.