-
Agrees to purchase Obregon
Brewery from Grupo Modelo for $600 million, subject to regulatory
approvals and customary closing adjustments
-
Initial Mexicali buildout
scaled to 5 million hectoliters of production capacity with
infrastructure investments to support potential expansion to 20
million hectoliters
-
Increases free cash flow
guidance for fiscal 2017 to a range of $575 - $675 million, as
Mexicali capital expenditure estimate is reduced for the
year
VICTOR, N.Y., Oct. 31,
2016 - Constellation Brands, Inc. (NYSE: STZ and STZ.B), a
leading beverage alcohol company, announced today that it will
submit to the U.S. Department of Justice a proposal to acquire a
brewery operation from Grupo Modelo, a subsidiary of Anheuser-Busch
InBev SA/NV for $600 million. The brewery, located in Obregon,
Mexico, is expected to have four million hectoliters of production
capacity with minimal investment and optimization by Constellation
after closing. This transaction is subject to customary closing
adjustments and U.S. Department of Justice and Mexican regulatory
approvals. The acquisition of the Obregon brewery allows
Constellation to immediately obtain functioning brewery capacity to
support its fast-growing, high-end Mexican beer portfolio and
provides flexibility for future innovation initiatives. It also
enables the company to become fully independent from the interim
supply agreement with Grupo Modelo. As a result, Constellation will
phase the buildout of 10 million hectoliters at Mexicali, with the
first 5 million hectoliters of production capacity expected to
become operational by December 2019, and subsequent capacity
planned to align with future growth.
"We believe this is the right strategy to provide
near-term capacity and greater flexibility to support our growth
and innovation plans, while allowing for the buildout of our
Mexicali brewery over an extended time period," said Rob Sands,
president and chief executive officer, Constellation Brands. "We
look forward to welcoming Obregon's talented employees to our
Constellation family and working together to continue to capture
the ongoing growth opportunities we see in the high-end segment of
the U.S. beer market."
The Obregon brewery is located on Mexico's west
coast in the state of Sonora, and will help service Constellation's
largest beer markets in the western U.S. The majority of Obregon's
production is currently satisfying the interim supply agreement
today, so it is expected to be a smooth transition during the
continued expansion of the Nava brewery and the buildout of the
Mexicali brewery.
"The magnitude of our long-term investments in
Mexico largely remain the same. The revisions to our operating
plans essentially represent an initial shift in spend to Obregon
from Mexicali. This will result in an increase in our free cash
flow estimate for fiscal 2017 to a range of $575 - $675 million,"
said David Klein, executive vice president and chief financial
officer, Constellation Brands. "As originally outlined, Mexicali is
scalable to 20 million hectoliters to support the future growth of
our beer business, which continues to significantly outperform the
U.S. beer market."
With the Obregon acquisition and phased buildout
of the Mexicali brewery, the company is now targeting the
following, which includes the previously announced glass plant
expansions:
Mexico Beer Expansion Capital
Expenditures (1) |
(in millions) |
|
|
|
|
|
|
FY 2014 -
2015 |
FY 2016 |
FY 2017 |
FY 2018 - 2021 |
Total (2) |
Nava Projects (3) |
$725 |
$650 |
$550 - $600 |
$525 - $575 |
$2,500 |
|
|
|
|
|
|
Mexicali Brewery Build (4) |
|
$125 |
$225 - $275 |
$1,000 - $1,050 |
$1,400 |
|
|
|
|
|
|
Total |
$725 |
$775 |
$775 - $875 |
$1,525 - $1,625 |
$3,900 |
(1)
Some rounding for presentation purposes.
(2)
Based on implied midpoint for all ranges.
(3)
Includes expansion of the Nava brewery to 27.5M HL of production
capacity; and glass plant warehouse, rail and furnace
expansion. Expected to be completed by early calendar
2018.
(4)
Includes 5M HL of production capacity and land, water rights,
infrastructure and other site requirements to accommodate
scalability to 20M HL of production capacity. Expected to be
completed by end of calendar 2019.
Supplemental Financial
Information
The company discusses free cash flow, a non-GAAP measure, in this
news release. Free cash flow, as defined in the reconciliation
below, is considered a liquidity measure and is considered to
provide useful information to investors about the amount of cash
generated, which can then be used, after required debt service and
dividend payments, for other general corporate purposes. A
limitation of free cash flow is that it does not represent the
total increase or decrease in the cash balance for the period. Free
cash flow should be considered in addition to, not as a substitute
for, or superior to, cash flow from operating activities prepared
in accordance with GAAP.
|
Range for the Year
Ending February 28, 2017 |
(in
millions) |
|
|
|
Net cash provided by operating activities
(GAAP) |
$ |
1,500.0 |
|
|
$ |
1,700.0 |
|
Purchases of property, plant and equipment |
(925.0 |
) |
|
(1,025.0 |
) |
Free cash flow (Non-GAAP) |
$ |
575.0 |
|
|
$ |
675.0 |
|
About Constellation
Brands
Constellation Brands (NYSE: STZ and STZ.B) is a leading
international producer and marketer of beer, wine and spirits with
operations in the U.S., Canada, Mexico, New Zealand and Italy.
Constellation is a Fortune 500®
company and one of the top performing stocks in the S&P 500
Consumer Staples Index. Constellation is the No. 3 beer company in
the U.S. with high-end, iconic imported brands such as Corona
Extra, Corona Light, Modelo Especial, Modelo Negra and Pacifico.
The company's beer portfolio also includes Ballast Point, one of
the most awarded craft brewers in the U.S. In addition,
Constellation is the world's leader in premium wine, selling great
brands that people love, including Robert Mondavi, Clos du Bois,
Kim Crawford, Meiomi, Mark West, Franciscan Estate, Ruffino and
Jackson-Triggs. The company's premium spirits brands include SVEDKA
Vodka and Casa Noble Tequila.
Based in Victor, N.Y., the company believes that
industry leadership involves a commitment to brand building, our
trade partners, the environment, our investors and to consumers
around the world who choose our products when celebrating big
moments or enjoying quiet ones. Founded in 1945, Constellation has
grown to become a significant player in the beverage alcohol
industry with more than 100 brands in its portfolio, sales in
approximately 100 countries, about 40 facilities and approximately
9,000 talented employees. We express our company vision: to elevate life with every glass raised. To learn more,
visit www.cbrands.com.
Forward-Looking
Statements
This news release contains forward-looking statements. All
statements other than statements of historical fact are
forward-looking statements. The word "expect" and similar
expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain such
identifying words. These statements may relate to business
strategy, future operations, future Obregon brewery production
capacity, prospects, estimated cash provided by operating
activities, estimated capital expenditures, free cash flow
estimates, plans and objectives of management, as well as
information concerning expected actions of third parties. All
forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from those set
forth in, or implied by, such forward-looking statements.
During the current quarter, Constellation Brands
may reiterate the forward-looking statements. Prior to the start of
the company's quiet period, which will begin at the close of
business on Nov. 30, 2016, the public can continue to rely on
the forward-looking statements as still being Constellation Brands'
current expectations on the matters covered, unless the company
publishes a notice stating otherwise. During Constellation Brands'
"quiet period," the forward-looking statements should not be
considered to constitute the company's expectations and should be
considered historical, speaking as of prior to the quiet period
only and not subject to update by the company.
The forward-looking statements are based on
management's current expectations and should not be construed in
any manner as a guarantee that such results will in fact occur or
will occur on any contemplated timetable. The Obregon brewery
transaction between Constellation Brands and Grupo Modelo is
subject to the approval of the United States Department of Justice
and Mexican regulatory approvals, as well as certain closing
conditions. There can be no assurance that these approvals will be
granted or will be granted on any contemplated timetable or that
the transaction will occur or will occur on the contemplated terms
or any contemplated timetable.
In addition to the risks and uncertainties of
ordinary business operations, the forward-looking statements of
Constellation Brands contained in this news release are subject to
a number of risks and uncertainties, including completion of the
Obregon brewery transaction and optimization on the expected terms,
timetable and costs, including actual closing adjustment amounts;
receipt of all required permits and regulatory approvals by the
expected dates and on the expected terms; completion of the glass
plant and Nava brewery expansions and Mexicali brewery construction
by the expected completion dates and on the expected terms and
costs, and with receipt of any necessary permits and regulatory
approvals; the duration of the Interim Supply Agreement; the
accuracy of all projections, including sales trends, glass supply
sources, and estimates of capital expenditure investments; ability
to achieve targeted volume growth, operating margin, and free cash
flow generation may all vary due to financial and operational
results which differ from those anticipated and the timeframe in
which achieved will depend on actual financial and operational
performance; and other factors and uncertainties disclosed from
time-to-time in Constellation Brands, Inc.'s filings with the
Securities and Exchange Commission, including its Annual Report on
Form 10-K for the fiscal year ended February 29, 2016, which
could cause future performance to differ from current
expectations.
CONTACTS
Media
Cheryl Gossin: 585-678-7191
Amy Martin: 585-678-7141
Investor Relations
Patty Yahn-Urlaub: 585-678-7483
Bob Czudak: 585-678-7170
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Constellation Brands Inc via Globenewswire
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