Public posturing may sell newspapers, but it's not conducive to actually doing business. With that in mind, I'm not too surprised that Constellation Brands (NYSE: STZ) and Canada's Vincor were able to quietly hammer out a workable deal, some four months or so after Constellation dropped its original bid for the wine company.
Under terms of this friendly buyout, Constellation will be offering $36.50 Canadian per share. Including Vincor's debt, that makes the total consideration for the deal about $1.3 billion. While the price is about a 16% premium to Vincor's closing price on Friday (and nearly a 56% premium to the point just before this all began), it's a deal that Constellation believes will still add to earnings slightly.
Now, the cynic in me has got to wonder whether the games Vincor's management played were worth it in the end. After all, when Constellation walked away in December, it was willing to offer $35 Canadian, subject to Vincor letting Constellation examine its books. In other words, Vincor took four months' time and risked scuttling the whole deal to earn an additional $1.50 Canadian per share (or $3.50 on the no-look basis). Given my skepticism about the ability of Vincor management to build value on its own, that was a risky gamble -- but it did pay off.
While Vincor won't make a major impact on Constellation's results in the short run and will boost the company's debt burden by more than 40%, it makes long-term sense. I believe the Vincor operations will benefit from superior management at Constellation, generating better results and returns that they would have on their own. Not only will Constellation get a boost from new markets and new brands, but also reap the incremental returns from simply improving Vincor's business.
Much as I like the alcohol business, there just don't seem to be too many bargains left -- at least in the Western world. Constellation and Diageo (NYSE: DEO) are both probably still at OK levels for long-term holders, but smaller companies that I've liked in the past, like CentralEuropean Distribution (Nasdaq: CEDC) and Willamette Valley Vineyards (Nasdaq: WVVI), aren't quite the bargains they once were. All the same, I'm sure many (if not most) Vincor shareholders will be toasting their good fortune today.
Bartender! Another round of Foolishness:
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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