Svedka vodka to be sold by Constellation Brands to Sazerac as wine and spirits segment faces challenges.

• Constellation Brands will sell Svedka vodka to Sazerac.
• No transaction details were disclosed, although it is anticipated that the deal will be finalized in the upcoming months.
• The company, Sazerac, is a privately-owned entity based in New Orleans and is the owner of several popular alcoholic beverages, including Buffalo Trace bourbon, Fireball Cinnamon Whisky, and Southern Comfort.

On Tuesday, it was announced that the company would sell its Svedka vodka brand to a New Orleans-based spirits company, Sazerac.

In a press release, Constellation announced that the transaction is expected to close in the upcoming months, although the value of the deal was not disclosed.

""Our wine and spirits portfolio has been reshaped through our past actions, which support our efforts to enhance its performance and achieve our growth objectives. This transaction is a step forward in optimizing our portfolio for success," said Constellation CEO Bill Newlands in a release."

The company's strong beer portfolio, which includes Modelo and Corona, has been negatively impacted by the performance of its wine and spirits business.

In the wine and spirits business, particularly in the lower-priced segments, we are still facing incremental category headwinds, as stated by Newlands during the company's October earnings call.

The company's wine and spirits shipments decreased by 9.8% in the second quarter compared to the previous year, while net sales and operating income for the segment fell by 12% and 13%, respectively.

Although wine and spirits only account for 5% of Constellation's volumes this year, they contribute 17% to its net sales. Out of the new sales, 86% come from wine and 14% from spirits.

In 2007, Constellation purchased Spirits Marque One LLC for $384 million and gained ownership of Svedka.

Svedka will be added to Sazerac's portfolio, which already includes Buffalo Trace bourbon, Fireball Cinnamon Whisky, Southern Comfort, and other global brands.

The spirits portfolio of Constellation will remain to include High West Whiskey, Mi Campo Tequila, and Casa Noble Tequila.

Despite a slight decline in early trading, the news of Constellation shares was met with approval from investors and analysts.

"The divestment of SVEDKA from the Wine division is a positive step for its future growth prospects, according to Bernstein analyst Nadine Sarwat. This move also indicates that management is committed to making difficult decisions to adapt the business, which is beneficial for corporate governance."

Bernstein has a buy-equivalent rating on the stock with a $325 price target, while the shares currently trade at approximately $237.

According to Bernstein, the news is a positive sign for Constellation as the company's wine and spirits division has negatively impacted its beer business.

The company said that additional details about the transaction will be provided at the Morgan Stanley Global Consumer and Retail Conference on Dec. 3.