When Constellation Brands took over the Robert Mondavi winery in California last year there was considerable speculation about the future of the Opus One winery joint venture between Mondavi and France's Baron Philippe de Rothschild, S.A. A decision was deferred at the time about how to continue the operation or whether one partner should buy out the other.

Last week Baroness Philippine de Rothschild, chairman of her family's company, and Richard Sands, CEO of Constellation, met in California to announce the decision to continue the partnership arrangement begun back in 1978.

The new agreement does call for operating independence for Opus One in three areas: vineyard management, sales and marketing, and administration. "Formerly employing the vineyard teams of Robert Mondavi, Opus One has now hired and trained its own vineyard personnel," Mr Sands said. "Decentralization is the cornerstone of how Constellation Brands operates." Which is not such a bad thing given the way the company continues growing internationally. The Constellation annual report for the year ended February 2005 gives the following picture of its production facilities:

Add in the beer distribution business which includes Corona beer from Mexico, Tsingtao from China and St Pauli Girl from Germany with a joint venture producing vodka and you have a considerable liquor conglomerate even before this week's attempt to buy the Canadian based wine company Vincor.

How the merchant bankers must love Mr Sands. The rapid growth of Constellation is based on massive borrowings. Total debt outstanding at 28 February 2005 at $US3,289.3 million was $US1,241.4 million more than a year earlier. A successful bid for Vincor would take the total debt well past the $4 billion mark. Net cash provided by operating activities in fiscal year 2005 was $320.7 million - down from $340.3 million the previous year. Constellation is one of those remaining rarities among major corporations that does not pay dividends. There has not been a cash dividend since the initial public offering in 1973. The annual report notes: "In addition, under the terms of the Company’s senior credit facility, the Company is currently constrained from paying cash dividends on its common stock. Also, the indentures for the Company’s outstanding senior notes and senior subordinated notes may restrict the payment of cash dividends on its common stock under certain circumstances. Any indentures for debt securities issued in the future and any credit agreements entered into in the future may also restrict or prohibit the payment of cash dividends on common stock."