Constellation Brands would eye deals

NEW YORK Wed May 18, 2011 3:28pm EDT

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NEW YORK (Reuters) - Constellation Brands Inc (STZ.N) would evaluate an acquisition of Australia's Treasury Wine Estates (TWE.AX) if the newly independent Treasury was up for sale, Constellation's chief executive said on Wednesday.

"There are elements of Treasury which we think are strong, and there are elements that might not (be). In the meantime, Treasury is not for sale," Constellation CEO Rob Sands said in an interview before a meeting with investors.

"If it becomes an opportunity and the business is either for sale or could be purchased, like any other significant opportunity we'll take a look at it," he added.

A spokeswoman at Treasury, the wine business just spun off by Foster's Group FGL.AX, could not immediately be reached for comment.

Constellation, the world's largest wine maker, has grown through acquisitions, such as by buying Ravenswood in 2001, Robert Mondavi in 2004 and the wine portfolio of Fortune Brands FO.N in 2007.

More recently, the company has been paying down debt, and just announced a share buyback program. Still, acquisitions are not out of the question.

"I think acquisitions will come back on our radar screen if good opportunities present themselves," Sands said.

Sands added that he was not terribly worried about a rival acquiring Treasury instead, noting that there are no other wine companies of the size likely needed to pull such a deal off, and that spirits companies are more focused on spirits.

He noted that private equity firms have in the past invested in the wine industry, but said there may not be enough cost savings to wring out of Treasury to make it worthwhile for such a buyer.

AFFIRMS EARNINGS OUTLOOK

Chief Financial Officer Bob Ryder, in a separate interview, repeated the company's earlier full-year earnings forecast of $1.90 to $2.00 per share.

In the last few months, food and drink companies have been grappling with soaring costs for commodities like grains, meat, cocoa and dairy.

But Constellation has not experienced such intense cost inflation, Ryder said, since its main ingredient is grapes, which are not as volatile.

He said three grape varieties -- muscato, pinot grigio and malbec -- were actually in tight supply, so could see prices increase. But overall, prices of Constellation's wines should be the same as last year.

"Last year the wine industry discounted more than a finance guy would like, but we did it and the industry did it," Ryder said. "This year, we won't be discounting more than last year, but we won't be discounting much less either."

And for the company's joint venture with Grupo Modelo (GMODELOC.MX), which distributes beers like Corona in the United States, there will be less discounting, Ryder said, as the company spends more on advertising and less on promotions.

Constellation shares were flat at $22.78 in afternoon trade on the New York Stock Exchange.

(Reporting by Martinne Geller; editing by John Wallace, Bernard Orr)

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