USA: Constellation Brands Inc.’s controlling family proposes relinquishing some of its voting power

Constellation Brands Inc.’s controlling family proposed relinquishing some of its voting power, which could make the Corona beer maker more flexible for deals, Bloomberg reported on April 4.

The Sands family has proposed that each share of Class B common stock be converted into 1.35 shares of Class A common stock, Constellation said in statement on April 4. The family would continue to be the company’s largest shareholder, but its voting power would be cut to 19.7% from 59.5%, according to a separate regulatory filing.

A simplified structure would be better aligned with the “one vote per share” policy widely supported by corporate-governance experts, the Sands family said. The family said its proposal wasn’t made in connection with any other corporate transaction. The change should be well-received by investors, since they have been frustrated by their lack of say in how the company spends its cash, Cowen analyst Vivien Azer said.

“This has been particularly topical in the last few months given ongoing unsubstantiated press reporting around a potential transaction with” energy-drinks producer Monster Beverage Corp., Azer said in a research note.

Talks between Constellation, whose brands Svedka Vodka and Robert Mondavi wine, and Monster are said to be progressing. Some analysts have said potential for cost savings are limited because the companies mostly operate in different segments.

Constellation’s Class A shares fell 1.9% at 9:41 a.m. in New York, erasing an earlier gain. The stock had fallen almost 7% through the close on Friday, April 1, trailing peers in the S&P 500 Consumer Staples Index.

Constellation, based in Victor, New York, has been expanding its beer business while emphasizing acquisitions of premium-priced alcoholic beverage brands. The company also holds a 38% stake in Canopy Growth, a Canadian-based producer of cannabis products, according to Bloomberg Intelligence.

The letter was signed by Rob Sands, executive chairman and former chief executive officer, and his brother Richard Sands, who is vice chairman.

“We believe that a declassification will help the company continue in its growth,” Sands wrote in the letter. He added that the family would also “be pleased to maintain our ability to control the company” should the board or shareholders prefer the status quo.

Constellation’s board has created a special committee to evaluate the proposal.

05 April, 2022