Fairport, N.Y - Wine maker Constellation Brands, Inc. (NYSE: STZ), which has more than 250 brands in its portfolio worldwide, has decided to sell its value spirits business to New Orleans, LA -based Sazerac Company, Inc. for $334 million.

The net deal includes $274 million in cash and $60 million in medium-term financing by Constellation at market interest rates, the Fairport, NY-based company disclosed.

Under the transaction, the total volume for brands being sold was more than 10 million cases for fiscal year 2008, with net sales for the divested brands totaling around $200 million, the firm said.

Constellation expects to report a pre-tax reported loss of about $11 million or an after-tax loss of around 20 cents per share. As a result of the transaction, the company lowered its fiscal 2009 earnings outlook to be in the range of between 45 cents to 49 cents per share, compared to the previous forecast of 65 cents to 69 cents per share.

The market analysts on Wall Street expect the firm to post better earnings in the following quarters as demand in liquor has not slowed as the country's economy sinks deep into the quicksand of recession with weakening consumer spending.

The speculation is based on the financial reports from the rival companies that have also experienced improved margins, growth in free cash flow, monetized assets and rapidly reduction in debts.

Last month, Brown-Forman Corp. (NYSE:BFB)(NYSE:BFA) reported better than expected second quarter earnings on higher sales of its Jack Daniel's Tennessee Whiskey brand in the U.S. and Finlandia vodka brand in Eastern Europe amid worst crisis since the Great Depression.

On Monday, Constellation, the world's largest wine producer and other beverage alcohol, said around $210 million of the total after-tax proceeds from the transaction, which is expected to be closed by the end of Friday, will be used to lower its borrowings. 

"With the proceeds from asset sales, along with our targeted free cash flow for fiscal 2009, we now expect our debt to comparable basis EBITDA ratio to be approximately four times by the end of the current fiscal year, which underscores the effectiveness of our focus on cash flow generation," Constellation Brands President and Chief Executive Officer Rob Sands said.

As a part of the deal, Constellation is giving up more than 40 brands including Barton, Skol, Mr. Boston, Fleischmann's, the 99 schnapps line, the di Amore line, Chi-Chi's pre-mixed cocktail line, Montezuma Tequila.

While, it will keep its three principal spirits brands, that is, Svedka vodka, Black Velvet Canadian whisky and Paul Masson Grande Amber brandy brands, which have combined annual volume of about 5 million cases.

"These are exactly the type of scale brands that fit well within Constellation's portfolio strategy, which is focused on well-known, trusted premium brands that represent good value to consumers," Sands added.

The company has left its fiscal 2009 comparable earnings per share guidance to be in the range of $1.68 per share to $1.72 per share, with free cash flow expectations for the same period remains unchanged at $360 million to $390 million. The market analysts anticipate the firm to report earnings of $1.69 per share for the fiscal year ending in February 2009.

Several employees associated with the brands being sold will transfer to the new owner, while some will be impacted by this change. The firm said it is taking "appropriate actions" to support those who are displaced without disclosing further details.

Shares of the company were moving higher by 50 cents or 3.36 percent to $15.39 in late morning trading session on Monday in New York, after closing at $14.89 on Friday.