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Constellation plans to buy Fortune's wine business

(Adds details on Aussie wine business, outlook, share activity)

NEW YORK, Nov 12 (Reuters) - Constellation Brands Inc STZ.N plans to buy the U.S. wine business of Fortune Brands Inc FO.N for $885 million, the companies said on Monday. The companies see the sale, which includes the Clos du Bois, Geyser Peak, and Wild Horse brands, closing by Dec. 31.

Constellation, the largest wine producer in the world, also said it was consolidating operations of its Hardy Wine Co. in Australia, as part of an ongoing strategic review of its wine business there, which has suffered recently from a severe drought in parts of the country.

Before that, there was an oversupply of Australian grapes that led to a glut of inexpensive, bulk wine which depressed prices in key export markets such as Britain.

The company, based in Fairport, New York, said it will transfer the winemaking and packaging operations of its Buronga winery to its Berri Estates winery. Buronga will retain some grape processing for juice and its viticultural staff to support local grape growers.

Constellation said it will explore other ways to streamline its international production operations, but did not elaborate.

The Hardy consolidation should produce cost savings of more than $5 million a year by the end of fiscal 2009, and total one-time charges of about $22 million from 2008 through 2010.

The acquisition of the U.S. wine business should reduce earnings modestly in fiscal 2008, and add to them slightly in fiscal 2009, Constellation said.

The company reduced its reported earnings outlook for the current year, 2008, to a range of $1.16 to $1.24 per share, from its prior forecast of $1.20 to $1.28 per share.

Excluding items, the forecast remains the same at $1.34 to $1.42 per share.

Fortune, which also owns Jim Beam bourbon, Titleist golf equipment and Moen faucets, said it expected to realize net proceeds of $840 million after taxes, and an after-tax gain of $50 million to $60 million on the sale.

Fortune shares were up 30 cents at $79.47 on the New York Stock Exchange, while Constellation shares were down 41 cents, or nearly 2 percent, at $22.58.

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(Reporting by Martinne Geller, editing by Lisa Von Ahn and Dave Zimmerman)

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