(RTTNews) - Winemaker Constellation Brands, Inc. (STZ: News , CBR.ASX) said Sunday that it is in talks to merge a portion of its Australian and U.K. businesses with Sydney headquartered Australian Vintage Ltd. (AUVGF.PK) to combat difficult trading conditions.

The U.S. based Constellation, which has more than 100 total brands in its portfolio, said the potential combination would create synergies between the two companies, better positioning the new entity for success in the current challenging operating environment.

Constellation said the talks are continuing and a number of material issues need to be addressed before a deal can be finalized. As a result, the discussions are preliminary and may not lead to a transaction.

If a transaction results, the combined companies would operate as a stand alone wine company, which would be listed on the Australian Stock Exchange with Constellation holding a substantial, but non-controlling, interest in the combined entity.
"The Australian wine industry is facing unprecedented negative operating conditions," said Rob Sands, president and chief executive officer, Constellation Brands. "This combination would create a more competitive entity better positioned to deal with the current environment."

"Constellation Brands remains focused on achieving stronger, more sustainable results by tightening the focus of the portfolio, optimizing assets and finding synergies across all aspects of the business," Sands said.

STZ declined $0.38 or 2.35% and closed Friday's regular trading at $15.82.

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by RTT Staff Writer

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