Star deal for Constellation and Hardy

We reported​ earlier this week that the US-based Constellation Brands had been discussing a possible takeover or partnership with Australia's BRL Hardy group. Today, the two companies have confirmed the deal - which will create the world's largest wine producer.

Under the terms of the deal, Constellation will acquire Hardy for around $1.4 billion (€1.32bn), including the assumption of $325 million in debt. The BRL Hardy and Constellation Brands wine operations will then be combined to form a separate global wine business - Constellation Wines - within the Constellation Brands group, led by Stephen Millar, Hardy's managing director.

Constellation wines will have sales of around $1.7 billion, while Constellation Brands' total sales, including its various beer and spirit brands, will top $3.2 billion.

Constellation's chairman and CEO, Richard Sands, said: "This is a tremendous addition to Constellation's portfolio. By combining two fast growing and high performing companies, we fulfil Constellation's strategic objectives to accelerate its growth rates, broaden its product portfolio and geographic reach and increase its competitive advantage.​

"BRL Hardy has generated dynamic results over the past five years, producing an average of 21 per cent sales growth and 26 per cent EBIT growth annually during that period. Together, we will create the world's largest wine company, with powerful market positions in the US, UK and Australia, and a strong platform to grow our export business in other key markets. Combined with continued investment in our fast growing US imported beer and UK wholesale businesses, Constellation will be a faster growing company."​

He continued: "We have complementary businesses that share a common growth orientation and operating philosophy, which will be truly enhanced when brought together. We will have a powerful wine brand portfolio, encompassing all price points and emphasising New World wines.​

"The strong growth prospects for wine worldwide - particularly those from Australia, the US, New Zealand and Chile - means we will be well-positioned to deliver increased top line growth and even higher earnings per share growth."​

BRL Hardy is Australia's largest wine producer and one of the top 10 wine companies in the world. Its domestic market share, with brands such as Banrock Station, Hardys Nottage Hill and Hardys Stamp, is around 24 per cent by volume, covering all price points across bottled table wine, casks, fortified and sparkling wines.

BRL Hardy's leading international market is the UK, where it claims the Hardy brand is the top selling wine brand in the off-trade. Banrock Station is also one of the top five wines in that market.

Australian wines have been gaining ground the US in recent years, as we reported​ last week, and Hardy has been quick to take advantage of this growing interest, recently forming a joint venture with Constellation to import its Australian, New Zealand and French brands. This venture, called, Pacific Wine Partners (PWP), has also acquired two American brands, Farallon and Blackstone.

For its part, Constellation already sells nearly 44 million cases of wine per year in the US, giving it a 20 per cent market share and putting it in second place overall behind Gallo. The takeover will still leave it in second place in the US, but it will now become the number one player in the UK and Australia; in the UK alone, the merged wine operations will have over 10 per cent share of the total market - more than double its nearest competitor.