Thursday, October 27, 2005

Constellation & Vincor - "Let's Get Ready to Rumbllllle"

If you've been following the action with Vincor lately, you know that they've been on Constellation's radar screen after first receiving a friendly offer (which was rejected) and now a formal hostile takeover at (C$31 per share) has been initiated. Vincor claims to be insulted by the offer, which expires in less than a month, and in late September, announced an auction process that would generate higher value and they announced on September 30th that they would name potential suitors the following week. Well, its been three weeks now and no suitors have been mentioned or even legitimately rumored, and they won't be either. On Monday, Vincor issued a letter to its shareholders asking them not to tender their shares to Constellation until the board gets back to them. This is merely at attempt to buy time, sort of like asking the passengers on the Titanic to see if the hole in the boat can be patched before they board the lifeboats.

What has happened is not surprising. Nobody is willing to pay the prices that Constellation is paying for wine companies (whether paying these will ultimately work for Constellation is the subject of a future post) and its not likely there will be any other suitors.

So now, Vincor is forced to try to extract greater value from its company and Constellation is not only sticking to its guns, but doing a stellar job of drilling Vincor in the press at every turn.

Richard Sands has recently said "There’s no reason to sweeten the bid, our bid is very sweet. If circumstances change, and there was a competing bid, we would evaluate any information that was available and make a decision at that time." - translated "We're not paying anything more than we have to, but we'll pay more if there is another bidder"

Sands also said "If before the expiration of our offer, no one shows up with an alternative and Vincor can’t bring certainty to some set of prospect, then the shareholder will be facing, 'do we take $31 in cash, or do we let the stock drop to the low $20s?'" - Brutal!

Also "Basically they’re throwing a party and they’re concerned no one’s coming.” - regarding other bidders.

Kudos to Vincor for not going down without a fight, but go down they will. The only thing that remains to be seen is, will CEO Don Triggs be remembered as the Ted Hall of Vincor?


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