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Fortune divests of wine
27 August, 2008
Page 7
Fortune Brands has strengthened its hand in the race to buy Absolut vodka by selling off its American wine business to Constellation for US$885 million (£428 million).
The group said it was a strategic move to focus more on the spirits sector of the drinks industry, in which it sees itself as a long-term global rival to Diageo and Pernod-Ricard.
Chief executive Norm Wesley said: "Positioning our business for higher returns is a key part of Fortune Brands' strategy to maximise shareholder value. Because the wine industry is lower margin and more capital intensive than spirits, it's naturally a lower return segment relative to our spirits business."
The sell-off signals to rivals that Fortune is serious about its global spirits role, and improves its financial clout in the forthcoming battle for Absolut firm Vin & Spirit, which is being sold off by the Swedish state monopoly.
Absolut would be a boost for the Fortune portfolio, which includes Courvoisier, Laphroaig and Jim Beam, but is arguably light in white spirits.
"The sale increases our financial flexibility," said Wesley, "and will enable us to more sharply focus resources on the higher return premium spirits segment of our business."
The deal will reinforce Constellation's position as the biggest single player in the US and global wine markets, giving it brands such as Clos du Bois, Geyser Peak and Wild horse .
The combined sales of the brands in the sale topped 2.6 million cases in 2006, with revenue of US$214 million, and strengthens further a US wine portfolio that already includes Paul Masson, Robert Mondavi and Echo Falls.
Fortune - which said it received multiple offers for its wine business - is to retain its Harveys sherry and Cockburn's port business.
The group said it was a strategic move to focus more on the spirits sector of the drinks industry, in which it sees itself as a long-term global rival to Diageo and Pernod-Ricard.
Chief executive Norm Wesley said: "Positioning our business for higher returns is a key part of Fortune Brands' strategy to maximise shareholder value. Because the wine industry is lower margin and more capital intensive than spirits, it's naturally a lower return segment relative to our spirits business."
The sell-off signals to rivals that Fortune is serious about its global spirits role, and improves its financial clout in the forthcoming battle for Absolut firm Vin & Spirit, which is being sold off by the Swedish state monopoly.
Absolut would be a boost for the Fortune portfolio, which includes Courvoisier, Laphroaig and Jim Beam, but is arguably light in white spirits.
"The sale increases our financial flexibility," said Wesley, "and will enable us to more sharply focus resources on the higher return premium spirits segment of our business."
The deal will reinforce Constellation's position as the biggest single player in the US and global wine markets, giving it brands such as Clos du Bois, Geyser Peak and Wild horse .
The combined sales of the brands in the sale topped 2.6 million cases in 2006, with revenue of US$214 million, and strengthens further a US wine portfolio that already includes Paul Masson, Robert Mondavi and Echo Falls.
Fortune - which said it received multiple offers for its wine business - is to retain its Harveys sherry and Cockburn's port business.
