CONSTELLATION SELL OFF

CONSTELLATION BRANDS INC. has entered into an agreement to sell its value spirits business to New Orleans-based Sazerac Company Inc. for $334 million, subject to closing adjustments. The transaction was expected to close by the end of February. The entire net after-tax proceeds of approximately $21O million will be used to reduce Constellation’s borrowings. The sale price includes $274 million in cash and $6O million in medium-term financing by Constellation at market interest rates. “This transaction is consistent with our strategic focus on premium, higher growth and higher-margin brands in our portfolio, and allows us to continue the process of reducing debt, generating free cash flow, creating efficiencies, and increasing ROIC,” stated Rob Sands, Constellation Brands President and Chief Executive Officer. “With the proceeds from asset sales, along with our targeted free cash flow for fiscal 2OO9, we now expect our debt to comparable basis EBITDA ratio to approximate four times by the end of the current fiscal year, which underscores the effectiveness of our focus on cash flow generation.” Spirits brands the company is retaining include SVEDKA Vodka, Black Velvet Canadian Whisky and Paul Masson Grande Amber Brandy.

As a result of this transaction, Constellation is divesting more than 4O brands including Barton, Skol, Mr. Boston, Fleischmann’s, the 99 schnapps line, the di Amore line, Chi-Chi’s pre-mixed cocktail line, Montezuma Tequila, in addition to numerous other brands representing over 6OO SKUs. The total volume for brands being sold was more than 1O million cases for fiscal year 2OO8, with net sales for the divested brands totaling approximately $2OO million. Distillery and bottling facilities included in the sale are located at Bardstown and Owensboro, Kentucky as well as a leased bottling facility at Carson, California. Constellation will retain its distillery and production facility at Lethbridge, Alberta, Canada. For complete listings of brands being sold and retained, visit www.cbrands.com. “To achieve synergies and operating efficiencies we will consolidate the retained premium spirits business into our North American wine operations,” explained Sands. “A consolidation plan is expected to be finalized by the close of the transaction. This is a good example of how we are creating efficiencies in our business by leveraging our existing infrastructure to propel growth and enhance ROIC.”