Constellation to Buyback Shares – Analyst Blog

Constellation Brands Inc. (STZ), the largest wine company in the world, has recently revealed plans to buyback 11 million shares for approximately $300 million. The repurchase deal would be made through Goldman Sachs Group Inc. (GS).

 

Constellation will finance the repurchase deal by utilizing funds from its existing $842 million credit facility. The company anticipates the share buyback program to be accretive to fiscal 2011 earnings, and will update its fiscal earnings guidance once the transaction gets completed. Currently, Constellation anticipates fiscal 2011 earnings, excluding non-recurring items, in the range of $1.53 to $1.68 per share.

 

Constellation has continuously been reducing leverage by deploying operating cash to pay down debt. Total debt at fiscal-end 2010 decreased by over $600 million year-over-year. At fiscal-end 2010, Constellation had cash and cash equivalents of $43.5 million, and a free cash flow of $295 million. For fiscal 2011, the company anticipates generating free cash flow in the range of $350 million to $400 million. This provides the financial flexibility to drive future growth.

 

With annual sales of $3.4 billion in fiscal 2010, Constellation commands a dominant position in the Premium Wine segment in the U.S., and is also a leading producer of wines in Canada, Australia and New Zealand and a major supplier of beverage alcohol in the U.K. The company primarily focuses on premium wine brands, which includes Robert Mondavi, Clos du Bois, Arbor Mist and Blackstone. Constellation also owns Svedka and Black Velvet spirit brands, and has a JV with Grupo Modelo SAB de CV – a Mexico-based producer of beers, for importing brands such as Corona Extra, Corona Light and Modelo Especial.