Constellation Brands further revises wine and spirits divestment deal to US$1.03bn

USA – Constellation Brands and E. & J. Gallo Winery have further reviewed their original transaction to divest a portion of Constellation’s wine and spirits portfolio from US$1.1 billion announced in the December 2019 revised agreement to US$1.03 billion.

The initial deal, which included Constellation selling some wine and spirits from its portfolio principally priced at US$11 retail and below, including related facilities located in California, New York, and Washington to E. & J. Gallo Winery, was announced in April 2019 and was pegged at US$1.7 billion.

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However, in connection with Federal Trade Commission (FTC) review conducted late last year, Constellation Brands agreed to sell the wine and spirits portfolio under consideration for US$1.1 billion after Cook’s California Champagne, J. Roget American Champagne, and Paul Masson Grande Amber Brandy were excluded from the transaction.

The companies have now further amended the revised agreement to address additional FTC areas of competitive concern primarily related to production for Sparkling Wine and settled for about US$1.03 billion.

Constellation’s Mission Bell facility and certain related real estate, equipment, contracts, and employees are now excluded from the transaction.

According to a statement issued by the company, the revised agreement was amended to support Constellation’s production needs following its decision to retain Cook’s California Champagne and J. Roget American Champagne.

Excluding the Mission Bell facility and related assets from the transaction results in an adjusted transaction price of approximately US$1.03 billion, subject to further scrutiny by the Federal Trade Commission.

According to the disclosure, US$250 million of the revised deal is an earnout if brand performance provisions are met over a two-year period after closing. Constellation still expects the revised transaction to close in the second quarter of fiscal 2021 and is subject to FTC review and clearance.

Constellation also expects to close its separate but related transaction with Gallo to divest the New Zealand-based Nobilo Wine brand and related assets for US$130 million, by the end of the second quarter of fiscal 2021, also subject to FTC review and clearance.

“This move puts us one step closer to finalizing this transaction,” said Bill Newlands, president and chief executive officer, Constellation Brands.

“We continue to work in collaboration with Gallo to satisfy all FTC obligations, and both companies remain fully committed to closing the transaction. Our wine and spirits transformation strategy continues to gain traction and we look forward to closing this transaction in the coming months.”

Constellation’s remaining wine and spirits portfolio represents a collection of Power Brands including the Robert Mondavi brand family, The Prisoner Wine Company brand family, Kim Crawford, Ruffino, Meiomi and SVEDKA Vodka.

The company’s portfolio also includes brands such as SIMI, Schrader Cellars, Mount Veeder Winery wine brands, High West Whiskey and Casa Noble Tequila, as well as new premium wine innovations such as Cooper & Thief, 7 Moons and Crafters Union.

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