E. & J. Gallo Winery and Constellation Brands, Inc today announced that they have completed the transfer of more than 30 wine brands. The closing of the sale from Constellation to Gallo was approved by the Federal Trade Commission (FTC) on December 23, 2020.
The acquisition includes well known wine brands such as Arbor Mist, Black Box, Clos du Bois, Estancia, Franciscan, Hogue, Manischewitz, Mark West, Ravenswood, Taylor, Vendange, and Wild Horse that will join the Gallo portfolio. With this acquisition, Gallo will expand its operational footprint with the addition of five wineries located in California, Washington, and New York, along with Constellation's Polyphenolics business.
The aggregate transaction price was approximately USD 810 million, consisting of approximately USD 560 million in cash paid at closing and the opportunity to receive up to USD 250 million in earnout payments if brand performance targets are met over a two-year period after closing. The transaction price reflects various adjustments of approximately USD 220 million related primarily to changes in inventory for which Constellation has already received the benefit.
In a separate transaction with Constellation, Gallo will also acquire the Nobilo New Zealand Sauvignon Blanc brand and certain related assets and liabilities for approximately USD 130 million, subject to certain post-closing adjustments.
“The closing of these deals positions our wine and spirits business for accelerated revenue growth and operating margin performance going forward,” said Bill Newlands, Constellation Brands’ president and chief executive officer. “We continue to see the staying power of consumer-driven premiumization trends, and these moves align with our vision of building a winning portfolio of bold and distinctive higher-end brands.”
According to its press statement, Constellation remaining wine and spirits portfolio represents “a collection of powerhouse brands” such as the Robert Mondavi brand family, The Prisoner Wine Company brand family, Kim Crawford - the #1 sauvignon blanc in the U.S. market, Meiomi - the #1 pinot noir in the U.S., and SVEDKA Vodka - the #1 imported vodka in the U.S. The company’s portfolio also includes a collection of highly-rated, higher-end brands such as SIMI, Schrader Cellars, Mount Veeder Winery, High West Whiskey, and Casa Noble Tequila, as well as premium wine innovations such as Unshackled, High West barrel finished cocktails, Meiomi Cabernet Sauvignon, and Kim Crawford Illuminate.
"The closing of this transaction represents our company's long-term commitment to the wine industry," said Chief Executive Officer, Ernest J. Gallo. He added, "We are pleased to welcome the new employees joining the Gallo family."
The acquisition was first announced by Gallo and Constellation in April, 2019 and originally valued at USD 1.7 billion. (inside.beer, 9.4.2019) According to an earlier announcement by Bill Newlands, President and COO of Constellation Brands, the sale represented the discontinuation of 40 percent of the company’s non-beer business. (inside.beer, 1.3.2019)
In June 2020, Constellation Brands said it was going to revise its purchase agreement with E. & J. Gallo in connection with the Federal Trade Commission (FTC) review process.Constellation’s Mission Bell winery and certain related real estate, equipment, contracts, and employees were excluded from the transaction. 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. (inside.beer, 2.6.2020)
Separately, Constellation announced today that it has also closed its transaction with Vie-Del Company to divest certain brands used in Constellation’s grape juice concentrate business, together with related inventory, interests in certain contracts, and liabilities.
Constellation’s agreement with Sazerac to divest the Paul Masson Grande Amber Brandy brand, related inventory, and interests in certain contracts for approximately USD 255 million, subject to certain closing and post-closing adjustments, has been authorized by the Federal Trade Commission and is expected to close in January 2021.
Pursuant to the FTC consent order, Gallo will also divest two of its legacy dessert brands, Fairbanks and Sheffield, to Precept Brands LLC. Terms of the transaction between Gallo and Precept were not disclosed.