ConstellationBrands’ board of directors has approved to convert the company’s Class B common stock into the right to receive one share of Class A common stock plus cash consideration. The elimination of the higher vote Class B common stock, including the associated voting control of the Sands Family means a reduction in the concentration of voting power and a reduced influence of the founding family. The Robert and Richard Sands had offered this step to the board in April (inside.beer, 4.4.2022), which the board with the family’s own votes has now accepted.
With that comes the retirement of Robert and Richard Sands, who currently serve as Executive Chairman of the Board and Executive Vice Chairman of the Board, respectively. Robert Sands will become Non-Executive Chairman of the Board and Richard Sands will continue on as a Board member. It is expected that the Sands Family will continue to be Constellation’s largest shareholder following completion of the reclassification. Following the reclassification, the Sands Family will be subject to customary standstill provisions.
The cash consideration for converting Class A common stock amounts to USD 64.64 per share of Class B common stock, or a total amount of USD 1.5 billion. This represents a 26.5% premium relative to Constellation’s Class A common stock closing share price as of June 29, 2022.
“After an extensive review and analysis by a special committee of the Constellation Brands board of directors, including input from an independent financial advisor and legal counsel, the board agreed it is in the best interests of the company and all Constellation shareholders, to eliminate the Class B common stock,” said Bill Newlands, Constellation’s President and CEO. “The proposed share reclassification will strengthen the company’s corporate governance profile by aligning voting rights with the economic interests of all shareholders. In addition, the Company’s simplified capital structure will provide a solid foundation as the Company continues to pursue its strategic growth initiatives and capital allocation priorities to build shareholder value.”
This reclassification will not be put to a vote at the upcoming 2022 Annual Meeting of Shareholders. Instead, the company will be seeking shareholder approval of the reclassification at a special meeting of shareholders, to be held following effectiveness of a registration statement to be filed with the Securities and Exchange Commission. The reclassification is subject to the approval of a majority of the outstanding shares of Class A and Class B common stock, voting together as a single class, a majority of the outstanding shares of Class B common stock, and a majority of the issued and outstanding shares of Class A common stock not held by the Sands Family, executive officers of Constellation or directors that hold Class B common stock.