By Andrew Starke
Constellation Brands, Australia’s largest wine group, and Australian Vintage (AVL) have ended merger discussions after six months of talks.
The two wine producers had been considering ways of joining AVL’s local and British businesses with the global wine giant’s operations.
However, in separate media statements, both parties conceded that it was in their best interests to end negotiations.
The biggest stumbling block appears to have been third party financing and whether the balance of power would be 50/50 or one party would have a 51 percent controlling stake in the new entity.
While both Constellation and AVL would have continued to operate as stand-alone wine companies had a merger been agreed, a new business would have cut the number of brands the companies produce.
Industry sources have speculated that this and the resulting mothballing of some production facilities may have helped in addressing the oversupply of wine in Australia.
“There were a number of goals both parties were attempting to accomplish through the combination,” said Constellation’s President and CEO Rob Sands.
“Over time, it became evident that despite both parties’ best efforts we were not going to be successful in accomplishing all these goals. Therefore, we mutually decided it was in the best interest of Constellation and AVL to discontinue our discussions and focus on our respective businesses.”
Chairman of AVL, Ian Ferrier, agreed in an almost identical statement, adding that: “Australian Vintage is in good financial shape with its lowest debt level in nine years. We will continue to manage the business through the cycle and look at all opportunities as conditions improve.”
The company recently announced that its CEO, Dane Hudson, would be stepping down from his position this month to pursue other interests.
AVL’s general manager of production and supply, Neil McGuigan, has taken on the role of interim CEO.