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Constellation Brands to Acquire Prisoner Wine Brands

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Prisoner Wine acquisition

Constellation Brands (STZ) is acquiring The Prisoner Wine Company’s portfolio of brands from Huneeus Vintners, a fine wine company. The acquisition, which was announced on April 6, is in line with Constellation Brands’ “premiumization” strategy, which focuses on high-end wine brands with accretive margin profiles. Constellation Brands expects to complete this acquisition for $285 million. The transaction is expected to be completed by the end of April and be accretive to fiscal 2017 EPS (earnings per share) by $0.03–$0.05.

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The Prisoner Wine Company

The Prisoner Wine Company comprises a portfolio of unique fine wine blends, including The Prisoner brand, which was launched in 2003. The Prisoner is now a leading super-luxury red blend. The brand is growing by almost 30% in the IRI (Information Resources) channels at the $40 retail price point.

Aside from The Prisoner, the acquisition of The Prisoner Wine Company will include four other luxury brands: Saldo, Cuttings, Blindfold, and Thorn. The overall volume for the five luxury brands reached 175,000 cases in 2015.

The addition of more premium brands will strengthen Constellation Brands’ wine business, which accounted for 39.6% of the company’s net sales in fiscal 2016. The First Trust Consumer Staples AlphaDEX Fund (FXG) has 2.5% exposure to Constellation Brands.

Inorganic growth

Constellation Brands emerged as the third largest beer producer in the United States by volume with the acquisition of the Corona and Modelo brands from Anheuser-Busch InBev (BUD) in 2013. Anheuser-Busch InBev had to divest these brands to gain regulatory approval for its takeover of Mexican brewer Grupo Modelo. Currently, Anheuser-Busch InBev is the largest beer producer in the United States. Molson Coors Brewing Company (TAP) is the second largest brewer in the United States with its MillerCoors joint venture with SABMiller (SBMRY).

Constellation Brands continues to strengthen its portfolio through strategic acquisitions. In August 2015, the company acquired the luxury wine brand Meiomi. The company also expanded into the fast-growing craft beer space through the acquisition of Ballast Point in late 2015. These acquisitions also boosted Constellation Brands’ margins. We’ll discuss the company’s margins in the next part of this series.

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