Corporates: AVL-Cons Brands Wine Merger Off

  Wine company Australian Vintage Ltd (AVL) and & #160;global wine giant Constellation Brands of the US (CBI) have ended talks over the merging of their Australian and UK & #160;operations.The move saw Australian Vintage's shares sold off, with a loss of more than 14%, or 4c, on the day.They closed at 23c.AVL chairman, Ian Ferrier, said in a statement to the ASX yesterday & #160;that both parties had been seeking to accomplish a number of goals, but over time it had become evident that there would be no success. & quot;Therefore, we mutually decided it was in the best interest of AVL and Constellation to discontinue our discussions and focus on our respective businesses, & quot; Mr Ferrier said. & quot;Australian Vintage is in good financial shape with its lowest debt level in nine years. & quot;We will continue to manage the business through the cycle and look at all opportunities as conditions improve. & quot;Mr Ferrier said AVL would provide a market update on vintage throughput early next month.AVL said last November that it was in talks with Constellation about combining part of CBI's Australian and UK operations with Australian Vintage in exchange for a substantial, but non-controlling interest in the combined entity.Mr Ferrier then told shareholders at the AGM & #160;later the same month that the talks were focused on a deal by which AVL would purchase part of Constellation's business with AVL shares, and existing AVL shareholders would hold the controlling interest in the combined business.In December 2009, AVL and CBI had asked for informal merger clearance from the Australian Competition and Consumer Commission in relation to a possible combining of part of CBI's Australian and UK wine operations with AVL in return for a non-controlling, 50% equity interest in the combined entity.The problem seems to have been the difference in the sizes of the two business. & #160;Australian Vintage's winemaking and distribution operations were much smaller than those of Constellation, which are based on the BRL Hardy business acquired a few years ago.Combining the two would have delivered more earnings (and perhaps losses) and revenue to the merger than Australian Vintage would have brought.Constellation's chief executive, Rob Sands, said in the US that the two companies mutually came to this decision to abandon the merger idea.He said Constellation & #160;will continue to operate its Australian and British businesses, & #160;focusing on cutting costs and increasing efficiencies.Constellation, owner of Robert Mondavi wines, has been pruning its portfolio, closing facilities and cutting jobs in an effort to reduce its debt load.  

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