Constellation Brands, Inc. · NYSE:STZ
Constellation Brands — Merger or Acquisition (August 2022)
41 slides from Constellation Brands's merger presentation, Aug 15, 2022
Slide 1: Class B Stock Reclassification Agreement
Filed by Constellation Brands, Inc. Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Subject Company: Constellation Brands, Inc. Commission File No. 001-08495 CLASS B STOCK RECLASSIFICATION AGREEMENT
Slide 2: Sustaining Profitable Growth & Building Shareholder Value
CONSTELLATION BRANDS SUSTAINING PROFITABLE GROWTH & BUILDING SHAREHOLDER VALUE COMPANY BEER WINE & SPIRITS PRODUCER AND MARKETER OF BEER, WINE, BEST IN CLASS BUSINESS WITH OPTIMIZED PORTFOLIO TO ACHIEVE AND SPIRITS WITH POWERFUL, CONSUMER- 7-9% NET SALES GROWTH & 2-4% NET SALES ORGANIC GROWTH & (3)
Slide 3: Capital Allocation Priorities Remain Investment Grade
CAPITAL ALLOCATION PRIORITIES REMAIN INVESTMENT RETURN CASH TO REINVEST IN BEER SMALLER / TUCK IN GRADE SHAREHOLDERS BUSINESS ACQUISITIONS 1 2 3 4 Target leverage ratio range of Plan to return $5B in dividends Capex expected to be $5.0B - Filling portfolio gaps while (1) ~3.5X and share repurchases
Slide 4: Total Shareholder Returns Outperforming Competitors
TOTAL SHAREHOLDER RETURNS OUTPERFORMING COMPETITORS ON A 1-, 3-, 5- AND 10-YEAR BASIS (1) (1) (1) (1) 1-Year Annualized TSR 10-Year Annualized TSR 3-Year Annualized TSR 5-Year Annualized TSR 10.0% 12.0% 12.0% 30.0% 25.2% 7.3% 5.0% 6.0% 6.0% 15.0% 5.2% 4.4% 8.8% 1.0% 0.0% 0.0% 0.0% 0.0% (0.4%) (8.0%)
Slide 5: Reclassification Agreement Summary
RECLASSIFICATION AGREEMENT SUMMARY KEY TRANSACTION TERMS ▪ Each share of Class B Stock will be reclassified and converted into one share of Class A Stock plus $64.64 per share in cash (1) ▪ Cash portion represents 3.3% of market cap, or ~$8 per Class A share for Constellation overall ▪ Run-rate cost
Slide 6: Robust Process to Evaluate the Proposed Reclassification
ROBUST PROCESS TO EVALUATE THE PROPOSED RECLASSIFICATION Special Committee comprised of 4 highly experienced independent Directors unaffiliated with the Sands Family Robust Engaged expert financial and legal advisors to support the evaluation process Special Committee Convened together and with advi
Slide 7: Key Factors Analyzed as Part of Evaluation Process
KEY FACTORS ANALYZED AS PART OF EVALUATION PROCESS ▪ Shareholder feedback supportive of a reclassification, but at a lower headline premium relative to Sands Family initial proposal Investment of a 1.35 Class B Stock to Class A Stock conversion ratio (implied 35% premium) Community ▪ Wall Street ana
Slide 8: Alignment of Voting and Economic Ownership
ALIGNMENT OF VOTING AND ECONOMIC OWNERSHIP Pre-Reclassification Share Class Structure & Sands Family Ownership If Reclassification Agreement Approved ~84% ~84% ~84% ~60% ~40% ~16% ~16% ~16% (1) (1) Economic % Voting % Economic % Voting % Economic % Voting % Economic % Voting % Sands Family Other Sha
Slide 9: Potential for Value Creation – Wall Street Analyst Perspectives
POTENTIAL FOR VALUE CREATION – WALL STREET ANALYST PERSPECTIVES WALL STREET ANALYSTS BROADLY FAVORABLE ON RECLASSIFICATION AND SEE POTENTIAL BENEFITS TO STOCK PRICE SELECT ANALYST COMMENTARY “[The April 4] announcement suggests a “We believe this is a positive catalyst for stock as “We believe inves
Slide 10: Potential for Value Creation – Multiple Expansion Analyses
POTENTIAL FOR VALUE CREATION – MULTIPLE EXPANSION ANALYSES BASED ON PUBLICLY TRADED BEER, WINE AND SPIRITS COMPANIES IMPLIES THAT CONSTELLATION IS TRADING AT A DISCOUNT P/E MULTIPLE VERSUS PEERS BASED ON ITS GROWTH AND MARGIN PROFILE Implied P/E Discount (Midpoint): (2.7x) (2.8x) 24.7x 24.7x 23.8x 2
Slide 11: Potential for Value Creation – Compensation Savings
POTENTIAL FOR VALUE CREATION – COMPENSATION SAVINGS ~$300M POST TAX VALUE FROM ELIMINATING EXECUTIVE COMPENSATION FOR ROBERT AND RICHARD SANDS PRO FORMA VALUE OF POTENTIAL SAVINGS § Robert and Richard Sands will transition to non- executive, Board-only roles (1) Estimated Total Annual Savings $15M -
Slide 12: Meaningful Governance Improvements Negotiated
MEANINGFUL GOVERNANCE IMPROVEMENTS NEGOTIATED Special Committee Sands Family Final Agreement Starting Position Early Response Robert and Richard to retire Robert and Richard to retire Executive Roles Unchanged Agreed from their executive roles from their executive roles 2 Board seats if Sands hold 2
Slide 13: Transaction Premium Was Heavily Negotiated
TRANSACTION PREMIUM WAS HEAVILY NEGOTIATED Sands Family Positions 35.0% 32.0% “Around Final Premium 30%” 29.0% 28.3% 28.0% (1) (2) 26.8% (1) 26.5% Special Committee 25.5% Positions 23.5% “Around 21.0% 20%” 18.0% 16.0% 5/17 5/24 5/31 6/14 6/24 6/25 Current 6/25 6/22 6/15 6/13 5/25 5/19 4/2 Source: Co
Slide 14: Prior Share Reclassifications Reviewed
PRIOR SHARE RECLASSIFICATIONS REVIEWED ANALYZED 29 TOTAL RECLASSIFICATIONS SINCE YEAR 2000 WITH MARKET CAPITALIZATION OF >$500M AND IDENTIFIED 8 “FOCUS PRECEDENTS” “FOCUS PRECEDENTS” SELECTED FROM FAMILY / FOUNDER / PREMIUM RECLASSIFICATION TRANSACTIONS Company Date Market Capitalization ($bn) Premi
Slide 15: Effective Cash Consideration <3% Per Share, Effective Premium <20%
EFFECTIVE CASH CONSIDERATION <3% PER SHARE, EFFECTIVE PREMIUM <20% (1) Per Class B Shares Outstanding Per Total Shares Outstanding Aggregate Cash Consideration Per Share Premium Per Share % Of Market Cap Reclassification Agreement $1,500 $64.64 26.5% $8.07 3.3% Cash Consideration Less: Compensation
Slide 16: Summary – Key Changes From Initial Proposal to Agreement
SUMMARY – KEY CHANGES FROM INITIAL PROPOSAL TO AGREEMENT INITIAL SANDS FAMILY PROPOSAL RECLASSIFICATION AGREEMENT ✓ Conversion of each share of Class B Stock into Class A Stock✓ Conversion of each share of Class B Stock into Class A Stock û 1.35 conversion ratio, implied 35% premium✓ 1:1 conversion
Slide 17: Board Recommendation for Shareholders
BOARD RECOMMENDATION FOR SHAREHOLDERS THIS RECLASSIFICATION WILL BE PUT TO A VOTE AT A SPECIAL MEETING OF SHAREHOLDERS THE RECLASSIFICATION IS SUBJECT TO THE APPROVAL OF: (1) 50.3% OF THE ISSUED AND OUTSTANDING SHARES OF CLASS A STOCK (2) NOT HELD BY THE SANDS FAMILY, EXECUTIVE OFFICERS OF CONSTELLA
Slide 18: Thank You
THANK YOU ation Bran #WORTHREACHINGFOR |
Slide 19: Appendix: Special Committee, Prior Reclassifications & Dilution
APPENDIX 1 ADDITIONAL DETAILS ON SPECIAL COMMITTEE, PRIOR SHARE RECLASSIFICATIONS & DILUTION TO CLASS B SHAREHOLDERS |
Slide 20: Special Committee Comprised of Independent, Disinterested Directors
SPECIAL COMMITTEE COMPRISED OF INDEPENDENT, DISINTERESTED DIRECTORS ▪ Currently the Chief Legal Officer and Secretary of Colgate-▪ Currently an independent business consultant based in Palmolive Mexico City ▪ Prior roles include: ▪ Prior roles include: – SVP, General Counsel and Secretary of NCR Cor
Slide 21: Numerous Prior Share Reclassifications Reviewed
NUMEROUS PRIOR SHARE RECLASSIFICATIONS REVIEWED ANALYZED 29 TOTAL RECLASSIFICATIONS SINCE YEAR 2000 WITH MARKET CAPITALIZATION OF >$500M AND IDENTIFIED 8 FOCUS PRECEDENTS ( FOCUS PRECEDENT) Controlling Party Ownership Controlling Party Vote Control Change Company Year Controlling Party Premium Befor
Slide 22: Dilution to Class B Shareholders Calculation
DILUTION TO CLASS B SHAREHOLDERS CALCULATION Class A Share Price (6/29) $243.63 Enterprise Value $55,511 (Less:) Net Debt $(10,210) (Less:) Premium (Net of Compensation Savings) $(1,206) Premium paid in cash will reduce the pro forma equity Pro Forma Equity Value $44,095 value due to incremental deb
Slide 23: Appendix: Disclaimers, Defined Terms & Additional Financial Information
APPENDIX 2 DISCLAIMERS, DEFINED TERMS & ADDITIONAL FINANCIAL INFORMATION |
Slide 24: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements that are based on certain assumptions, estimates, expectations, plans, analyses, and opinions made by management in light of their experience and perception of historical trends, current conditions, and expected future
Slide 25: Forward-Looking Statements (Cont.)
FORWARD-LOOKING STATEMENTS (CONT.) In addition to the risks and uncertainties of ordinary business operations and conditions in the general economy and markets in which we compete, our forward-looking statements contained in this presentation are also subject to the risk, uncertainty, and possible v
Slide 26: Disclaimers, Use of Non-GAAP Financial Measures, and Caution Regarding Outdated Material
DISCLAIMERS, USE OF NON-GAAP FINANCIAL MEASURES, AND CAUTION REGARDING OUTDATED MATERIAL Important Additional Information This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval nor shall there be any sal
Slide 27: Defined Terms
DEFINED TERMS Unless the context otherwise requires, the terms “Company,” “Constellation”, “CBI,” STZ, “we,” “our,” or “us” refer to Constellation Brands, Inc. and its subsidiaries. We use terms in this presentation that are specific to us or are abbreviations that may not be commonly known or used.
Slide 28: Comparable Measures (Non-GAAP)
COMPARABLE MEASURES (NON-GAAP) Comparable measures are provided because management uses this information in evaluating the results of the core operations of the Company and/or internal goal setting. In addition, the Company believes this information provides investors valuable insight on underlying
Slide 29: Comparable Measures (Non-GAAP)
COMPARABLE MEASURES (NON-GAAP) Other Other includes items that are not specifically related to acquisitions and divestitures or restructuring and other strategic business development costs (e.g. unrealized net (gain) loss on securities measured at fair value, loss on extinguishment of debt, impairme
Slide 30: Reported Statement of Operations (GAAP)
REPORTED STATEMENT OF OPERATIONS (GAAP) Fiscal Fiscal Fiscal Fiscal First Second Third Fourth Fiscal First Year Year Year Year Quarter Quarter Quarter Quarter Year Quarter 2018 2019 2020 2021 2022 2022 2022 2022 2022 2023 (in millions, except share and per share data) Net sales $ 7,580.3 $ 8,116.0 $
Slide 31: Reconciliation of Reported and Comparable Non-GAAP Information
RECONCILIATION OF REPORTED AND COMPARABLE NON-GAAP INFORMATION Fiscal Fiscal Fiscal Fiscal First Second Third Fourth Fiscal First Year Year Year Year Quarter Quarter Quarter Quarter Year Quarter 2018 2019 2020 2021 2022 2022 2022 2022 2022 2023 (in millions, except per share data) Net Sales Reported
Slide 32: Reconciliation of Reported and Comparable Non-GAAP Information
RECONCILIATION OF REPORTED AND COMPARABLE NON-GAAP INFORMATION Fiscal Fiscal Fiscal Fiscal First Second Third Fourth Fiscal First Year Year Year Year Quarter Quarter Quarter Quarter Year Quarter 2018 2019 2020 2021 2022 2022 2022 2022 2022 2023 (in millions, except per share data) Operating Income (
Slide 33: Comparable Statements of Operations (Non-GAAP)
COMPARABLE STATEMENTS OF OPERATIONS (NON-GAAP) Fiscal Fiscal Fiscal Fiscal First Second Third Fourth Fiscal First Year Year Year Year Quarter Quarter Quarter Quarter Year Quarter 2018 2019 2020 2021 2022 2022 2022 2022 2022 2023 (in millions, except share and per share data) Net sales $ 7,580.3 $ 8,
Slide 34: Canopy Equity Earnings (Losses) and Related Activities (Non-GAAP)
CANOPY EQUITY EARNINGS (LOSSES) AND RELATED ACTIVITIES ( CANOPY EIE ) (NON-GAAP) Fiscal Fiscal Fiscal Fiscal First Second Third Fourth Fiscal First Year Year Year Year Quarter Quarter Quarter Quarter Year Quarter 2018 2019 2020 2021 2022 2022 2022 2022 2022 2023 (in millions except per share data) C
Slide 35: Adjusted EBITDA Calculation and Reconciliation, Free Cash Flow Reconciliation
ADJUSTED EBITDA CALCULATION AND RECONCILIATION, FREE CASH FLOW RECONCILIATION (NON-GAAP) Fiscal Fiscal Fiscal Fiscal Fiscal First Second Third Fourth Fiscal First Year Year Year Year Year Quarter Quarter Quarter Quarter Year Quarter 2017 2018 2019 2020 2021 2022 2022 2022 2022 2022 2023 (in millions
Slide 36: Adjusted EBITDA Calculation and Reconciliation, Excluding Canopy EIE
ADJUSTED EBITDA CALCULATION AND RECONCILIATION, EXCLUDING CANOPY EIE (NON-GAAP) Fiscal Fiscal Fiscal Fiscal Fiscal First Second Third Fourth Fiscal First Year Year Year Year Year Quarter Quarter Quarter Quarter Year Quarter 2017 2018 2019 2020 2021 2022 2022 2022 2022 2022 2023 (in millions) Compara
Slide 37: Business Segment Information
BUSINESS SEGMENT INFORMATION Organic Net Sales Amounts included for the Canopy segment represent 100% of Canopy’s reported results on a two-month lag, prepared in accordance with U.S. GAAP, and converted from Canadian dollars to U.S. dollars. Although we own less than 100% of the outstanding shares
Slide 38: Business Segment Information
BUSINESS SEGMENT INFORMATION Fiscal Fiscal Fiscal Fiscal First Second Third Fourth Fiscal First Year Year Year Year Quarter Quarter Quarter Quarter Year Quarter 2018 2019 2020 2021 2022 2022 2022 2022 2022 2023 (in millions) Net Sales Beer $ 4,660.4 $ 5,202.1 $ 5,615.9 $ 6,074.6 $ 1,572.0 $ 1,861.3
Slide 39: Business Segment Information
BUSINESS SEGMENT INFORMATION Fiscal Fiscal Fiscal Fiscal First Second Third Fourth Fiscal First Year Year Year Year Quarter Quarter Quarter Quarter Year Quarter 2018 2019 2020 2021 2022 2022 2022 2022 2022 2023 (in millions) Income (Loss) from Unconsolidated Investments Beer (B) $ - $ - $ - $ - $ -
Slide 40: Reported and Organic Net Sales
REPORTED AND ORGANIC NET SALES (in millions) First First Percent Second Second Percent Third Third Percent Fourth Fourth Percent Fiscal Fiscal Percent Fiscal Year 2023 Quarter Quarter Change Quarter Quarter Change Quarter Quarter Change Quarter Quarter Change Year Year Change 2023 2022 2023 2022 202
Slide 41: Reported and Organic Net Sales
REPORTED AND ORGANIC NET SALES (in millions) First First Percent Second Second Percent Third Third Percent Fourth Fourth Percent Fiscal Fiscal Percent Fiscal Year 2020 Quarter Quarter Change Quarter Quarter Change Quarter Quarter Change Quarter Quarter Change Year Year Change 2020 2019 2020 2019 202
Constellation Brands — Merger or Acquisition (August 2022) on 6ix