BY MARK KANE | 03/19/2018 12:25:28OTTAWA — The global constellation brands have already spent about $100 million in the last three months on buying into tech giants, according to a new report from financial services firm BMO Nesbitt Burns.
The firms are also targeting to take out at least another $10 million in debt, which will help fund the spending spree, said John Dvorak, BMO’s senior managing director of research.
The companies are taking a series of steps to expand their reach, including a strategic alliance with the American Express Co. to allow them to buy up to 100 million shares of its common stock a year.
The alliance, which has been in the works for about a year, was announced last week.
It’s likely to see further growth as more of the companies’ brands have started to buy into the American companies’ businesses.
“The constellation brands and their peers are making investments into businesses that are complementary to the company’s business model,” Dvork said in an interview.
“So they want to diversify their business to keep themselves competitive.
It makes sense to diversification.
The bigger the business, the bigger the potential for dividends and other dividends.
It is the right thing to do for the company and the market.”
The new deals could help boost the companies cash flow.
For example, Banc of America Corp., which has about $20 billion of debt, will receive $12 billion in additional debt financing in the third quarter.
That would put the company on track to have about $25 billion of cash on hand by the end of 2019.
Banc has been the biggest beneficiary of the constellation deals.
The investment bank’s market capitalization, which includes the constellation brands, rose $5.7 billion in the latest quarter, up from $5 billion in a year earlier.
It had $2.6 billion in total debt as of September 30.
The Banc deals represent a major shift in the constellation brand’s business strategy.
Banc had been looking for a way to expand its exposure to its own brands.
It now has an interest in acquiring more than $100 billion in tech assets.
The new constellation deals are likely to add more value to the bank, said Michael Kugler, an analyst at Sanford C. Bernstein & Co.
The investment bank will be able to invest in more of its brands than ever before, which could help the bank remain competitive in the future.
“They will be spending more in the long term because the constellation will be profitable,” Kuglersaid in a note to clients.
“We think the constellation assets will continue to grow and be a strong anchor for our long-term business.”
The constellation deals represent another sign of the rising value of the brands’ stock, which fell last year after the Banc deal.
The stock has dropped more than 50 percent since then.
BANC’s stock, however, has gained more than 30 percent.