Constellation ends merger talks with Australian Vintage

Constellation Brands has broken off talks to combine part of its Australian and British wine operations with Australian Vintage (AVL).

The world’s biggest winemaker by volume says the decision to end negotiations with its smaller rival was a mutual one.

Based in New York, Constellation Brands says it will continue to focus on cutting costs and finding ways to make its British and Australian businesses more efficient.

Constellation’s wine operations in Australia, as well as those of many competitors, have struggled in recent years amid a surplus of grapes and wine, thin profit margins and a rising Australian dollar, which weakens the value of exported wine.

Especially the plunge in wine sales in Britain and Australia in late 2008 led the company to restructure its Australian business last summer. Constellation Brands was forced to trim its workforce and sell wineries, vineyards and product lines.

If the merger had gone ahead, it would have created a stand-alone, low-cost wine producer, with AVL as the likely majority stakeholder and Constellation taking a substantial interest in the company.

Between them, Constellation and AVL produce roughly one-third of Australia’s wine.

Constellation, best known in the U.S. for wines like Robert Mondavi and Ravenswood, makes Australian brands such as Hardys, Banrock Station and Leasingham. Australian Vintage produces such brands as Miranda, Yaldara and Sunnyvale.