Constellation to sell Canadian wine business to Ontario Teachers' Pension Plan

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Constellation Brands Inc. agreed to sell its Canadian wine business to the Ontario Teachers' Pension Plan, Toronto, for C$1.03 billion ($783 million), as the U.S. liquor giant focuses more on beer and premium drinks.

Constellation expects to receive cash proceeds of C$750 million from the sale net of repayment of outstanding debt, according to a statement Monday. The transaction, which is subject to the standard approvals, is slated to close by the end of the calendar year, the Victor, N.Y.-based company said.

The sale marks a change in tack for the business: Constellation said in April that it would explore an initial public offering for some of the unit to strengthen its financial profile. Splitting off some of the wine portfolio makes Constellation more reliant on beer, a division that it expanded with the 2013 acquisition of the Corona business in the U.S. and continued with last year's $1 billion takeover of craft brewer Ballast Point.

“We seized the opportunity to sell the entire business in a value-enhancing transaction when it presented itself,” said Rob Sands, CEO of Constellation. “The Canadian wine business is the leader in the Canadian wine market and is a long-term growth opportunity.”

Ontario Teachers, Canada's third-biggest pension fund with C$171.4 billion in assets, said it will be partnering with the existing management team at Constellation Brands Canada, including CEO Jay Wright.

The business is “an ideal addition to our consumer portfolio,” Jane Rowe, Ontario Teachers' senior vice president of private capital, said in a separate statement. “The company is already the undisputed market leader in the Canadian wine industry and has excellent potential for continued growth and value creation.”