Boston, MA 10/03/2014 (wallstreetpr) – Constellation Brands, Inc. (NYSE:STZ) disclosed that it would be spending $400 – $500 million towards expanding its hectoliter at the Nava Brewery facility in Mexico. As a result, its production would increase to 25 million hectoliters from 20 million. The company expects the expansion to be completed before the end of the year 2017. It also announced its agreement to buy glass plant and connected warehouse.
Acquires Glass Plant
According to the statement of the Constellation Brands, Inc. (NYSE:STZ), it has submitted a proposal to the Department of Justice in the U.S. to buy Anheuser-Busch InBev SA/NV or ABI’s high-tech glass production plant for $300 million. The plant is located nearer to Constellation Brand’s brewery in Mexico’s Nava.
The agreement included acquisition of a land and rail infrastructure and a high-density warehouse. The transaction would have to be approved by Mexican and the Justice Department, which the company expects to get them before the closure of the current calendar year.
Fresh Investments
Currently, the glass plant has one fully equipped glass furnace. There were plans to increase it to four furnaces. Constellation Brands, Inc. (NYSE:STZ) said that once the four furnaces become fully operational, the facility would meet over 50% of its glass needs for its beer business in the U.S. The company would also be investing $175 – $225 million towards capital expenditure to improve the site’s infrastructure in connection with warehouse and rail expansion.
Additionally, the company disclosed that it struck a deal with Owens-Illinois for a 50-50 joint venture to own and operate the production of glass container plant to be acquired from ABI. For this, Owens-Illinois would contribute about $100 million for its share of 50% in the joint venture. However, this would not include land and rail infrastructure and the warehouse since these assets would be held by the company outside the purview of the joint venture.
Constellation Brands, Inc. (NYSE:STZ) said that the JV would offer bottles exclusively for its brewery. Owens-Illinois would have the responsibility of operating plant such as purchasing, services besides the expansion of the plant. It indicated that the expansion of capacity would also be undertaken at a cost of about $300 – $400 million to be shared equally by both the partners.
