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Vincor profit hit by takeover battle

By Blaise Robinson

TORONTO (Reuters) - Third-quarter profit at Vincor International Inc. fell 25 percent, hurt by the cost of fending off a takeover by U.S. wine maker Constellation Brands Inc. , Canada's biggest winemaker said on Friday.

Vincor, whose brands include Jackson-Triggs, Inniskillin, Kumala and Kim Crawford, said it earned C$14.4 million ($12.5 million), or 43 Canadian cents a share, for the third quarter ended December 31, compared with a profit of C$19.2 million, or 57 Canadian cents a share, in the year-before period.

The latest results included a C$9.5 million charge related to adviser and legal fees and shareholder communications while it defended itself against Constellation, the world's largest wine company, whose bid Vincor repelled in December.

Excluding items, adjusted net income rose 10 percent to C$22 million, or 65 Canadian cents a share.

"Results were pretty much in line with what we imagined, but I think the takeover costs were higher than everybody thought," said Ron Ho, an analyst at Raymond James.

Mississauga, Ontario-based Vincor said revenue rose slightly to C$207.2 million from C$206.2 million as stronger sales in Canada and the United States were offset by lower sales, after currency translation, in Australia and Britain.

Vincor's president and chief executive, Donald Triggs, said the results were in line with the company's expectations, despite difficult market conditions and the diversion of senior management's time to deal with Constellation's bid.

"Our attention is now back and fully focused on our operations," Triggs told a conference call.

The rising Canadian dollar snipped revenue growth by C$7.5 million, Vincor said.

Vincor's British operations were also hit by stiff competition from imports of Australian wine, which resulted in lower prices, the company said. In Australia, the company was squeezed by consolidation in the retail sector which affected trade inventory levels.

"The market conditions in both these countries are difficult, and we believe will remain difficult for the foreseeable future," Triggs said.

STILL A TARGET

Shares of Vincor were up 65 Canadian cents, or 2.2 percent, at C$29.65 on the Toronto Stock Exchange on Friday afternoon. The stock has not yet recovered from an 8 percent drop after Constellation walked away empty-handed last December after its sweetened C$33-a-share offer was rebuffed.

Ho said Vincor could still be considered as a prey to Constellation mainly because of great potential synergies in distribution if the two winemakers merge.

"I think, at this point, Constellation is willing to just sit back and watch how things unfold and, possibly, if the stock trades down any further, they could be back with another bid," the analyst said.

Ho has an "underperform" rating and a price target of C$27 on Vincor's shares.

"There are still too many headwinds for the stock to really be in the mid-C$30s,," the analyst said.

(Additional reporting by Ka Yan Ng)

($1=$1.14 Canadian)

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