USA – Constellation Brands together with E. & J. Gallo Winery have agreed to revise their original deal in which the Corona beer maker is seeking to sell about 30 wines and spirits brands to approximately US$1.1 billion.

In April this year, Constellation had agreed to sell 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 for US$1.7 billion.

In connection with Federal Trade Commission (FTC) review, the new transaction price will be revised to approximately US$1.1 billion, of which US$250 million is an earnout based on divested brand performance over a two-year period.

As a result, the brands Cook’s California Champagne, J. Roget American Champagne, and Paul Masson Grande Amber Brandy will be excluded from the transaction.

Constellation noted that the revisions to the transaction are to address competitive concerns raised by the FTC primarily related to the Sparkling Wine, Brandy, Dessert Wine, and Concentrate categories.

As part of the ongoing transformation strategy for the Wine and Spirits business, Constellation revealed that it is also pursuing other opportunities to divest the brands and Concentrate business excluded from the original agreement to companies whose business strategies better align with the brands.

The revised transaction and the divestment of the excluded brands are expected to close by the end of fiscal 2020 and are subject to FTC review and approval.

In a separate transaction, Constellation has entered into an agreement with E. & J. Gallo to divest the New Zealand-based Nobilo Wine brand and related assets for US$130 million.

This transaction is expected to close in the first half of fiscal 2021 and is subject to FTC and New Zealand regulatory review and approval. Constellation plans to use the proceeds from the transactions for debt repayment.

“We remain confident in our wine and spirits transformation strategy and we are committed to continuing to work with Gallo and the FTC to finalize this transaction,” said Bill Newlands, Constellation Brands president and CEO.

“We continue to focus our total portfolio to align with consumer-led premiumization trends and growing segments of the market.

“We believe pursuing a revised agreement is in the best interest of the brands, our collective employees, business partners and consumers.

“We aim to close as soon as possible and look forward to a seamless transition while continuing to drive momentum in our respective businesses.”

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.