Constellation not focused on M&A
CHICAGO (Reuters) - Constellation Brands Inc (STZ.N), which has built much of its growth through acquisitions, said on Wednesday that mergers were not a current focus for the world's largest wine company.
"M&A has been an important part of our strategy in the past," Constellation Chief Executive Officer Robert Sands said at the Reuters Food and Agriculture Summit in Chicago.
"Currently, especially in this economic environment, acquisitions are not our current focus. Our focus is generating free cash flow and paying down debt," Sands said.
Still, Constellation said it would look at the wine business Altria Group Inc (MO.N) gained through its purchase of UST if those properties came up for sale.
Some of those assets, such as the Ste Michelle Wine Estate business, would be redundant to Constellation's existing Robert Mondavi Winery business, Sands said.
"Ste Michelle -- it's not critical to our portfolio," Sands said. "It's not a must-have."
Yet nothing in the portfolio being sold by French spirits and wine group Pernod Ricard SA (PERP.PA) struck his interest. "Nothing strikes me that is particularly interesting," he said.
Pernod said it planned to sell around 1 billion euros of unspecified assets to cut debt after it paid 5.7 billion euros for Absolut vodka group Vin & Sprit last summer. Pernod has already sold some small spirits brands which make up around 10 percent of its sell-off target.
"We wouldn't categorically rule out spirits, but we would be uninterested at any of the more recent valuation levels," Sands said. There would have to be "big changes in value expectations in sellers if we were to buy a spirits brand that went on the market."
Sands said that normally Constellation would be comfortable making acquisitions at its current debt levels, but the economic environment and tight credit markets make it unattractive to do deals.
"There isn't much of a debt market out there. That's what everyone is waiting for -- lending to start happening. Money is not cheap. Money is not available, regardless of your attractiveness level," Sands said.
Meanwhile, Constellation is continuing to evaluate its portfolio and may dispose of low-return, low-margin products.
"We can swing either way -- acquisitions or dispositions. We're tending to swing more to disposals lately," Sands said.