Just days after Heaven Hill Brands announced executive changes to pass control of the family-owned distiller to a third generation, Constellation Brands announced Robert and Richard Sands, who currently serve as Executive Chairman of the Board and Executive Vice Chairman of the Board, respectively, will retire from their employment with Constellation Brands in their current executive capacities. Robert Sands will become Non-Executive Chairman of the Board and Richard Sands will continue on as a Board member.
The retirement will follow approval by shareholders to eliminate the company’s Class B common stock.
The proposed transaction contemplates that each outstanding share of the company’s Class B common stock, including those owned by the Sands Family, will be converted into the right to receive one share of Class A common stock plus cash consideration in the amount of $64.64 per share of Class B common stock, or a total amount of $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.
The Company expects to realize a number of corporate governance and other benefits from the proposed reclassification, including:
- the elimination of the higher vote Class B common stock, including the associated voting control of the Sands Family, and a reduction in the concentration of voting power
- simplification of the Company’s equity capital structure to better align the voting rights and interests of all shareholders
- broader appeal of its shares to a larger base of investors who prefer single voting class common stock structures
- operating cost savings associated with executive salary and certain benefits ($15-20 million of cost in fiscal 2022), as well as administrative savings from maintaining the Class B common stock
- rotation of the lead independent director position on the Board at the next available normal cycle opportunity
- shift to majority voting in uncontested elections from current plurality standard for its Board of Directors and adoption of a Board anti-pledging policy
Constellation said it expects the Sands family to continue to be the company’s largest shareholder after the transaction.
“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,” said Bill Newlands, president/CEO.
Constellation appears to be following the path of Anheuser-Busch Cos., which eliminated a dual-class structure rather than that of Brown-Forman Corp. and Ford Motor Co., both of which have two classes of stock and remain controlled by the founding families.
Wall Street traders, and especially those involved in mergers and acquisitions, hate dual-class companies because they eliminate the ability for a quick takeover, which is what happened to Anheuser-Busch. Family controlled companies generally cite the factor of family control as enabling long-term business building whereas one-class companies are more focused on quarterly results.
Constellation was founded by Richard and Robert Sands’ father, Marvin Sands, and grew from a small wine business into a global behemoth under the brothers’ leadership through a series of acquisitions. Richard Sands is 71 years old and lives in Delray Beach, Fla. Robert Sands is about 65 years old and lives in Canandaigua, N.Y. Robert worked for two years at a Rochester law firm before joining C-Brands as general counsel.
Both brothers are married. It is not known whether either has children or, if they do, whether the children are actively involved in the business.
