Constellation Brands, E. & J. Gallo Winery sign revised deal to address FTC concerns
US drinks companies Constellation Brands and E. & J. Gallo Winery have agreed to revise their previously announced $1.7 billion deal in order to address regulatory concerns, as per the latest drinks acquisition news.
Constellation Brands said that the revisions to the transaction are to resolve competitive issues brought up by the US Federal Trade Commission (FTC), which mainly pertain to the sparkling wine, dessert wine, brandy, and concentrate categories.
As per the original deal signed in April 2019, Constellation Brands was to sell nearly 30 brands from its wine and spirits portfolio, and related facilities in California, New York, and Washington to E. & J. Gallo Winery, a California-based winery. The brands involved in the deal are mainly priced at $11 retail and below.
The US drinks companies have now revised the deal price to nearly $1.1 billion following the exclusion of Cook’s California Champagne, Paul Masson Grande Amber Brandy, and J. Roget American Champagne brands.
The revised transaction consideration includes an earnout of $250 million if brand performance provisions are achieved during a two-year period after the closing of the deal.
Joseph E. Gallo – CEO of E. & J. Gallo Winery said: “Both the Gallo and Constellation teams are committed to completing the transaction. We see a tremendous opportunity with this acquisition to bring new consumers into the wine category and look forward to integrating these brands into our portfolio and welcoming the new employees to our family winery.”
According to Constellation Brands, Cook’s, J. Roget, and Paul Masson Grande Amber Brandy, put together, sell nearly five million cases a year. The alcohol beverage company said that under its ongoing transformation strategy for its wine and spirits business, it is exploring other opportunities to sell the brands and also its concentrate business excluded from the original agreement to companies whose business strategies are better aligned with the brands.
Constellation Brands expects the revised deal and the sale of the excluded brands to be wrapped up by the end of fiscal 2020, subject to review and approval from the FTC.
In a separate development, the alcohol beverage company has signed an agreement with E. & J. Gallo to sell the New Zealand-based brand Nobilo Wine and associated assets for $130 million. The deal, which is subject to FTC and New Zealand regulatory review and approval, is likely to be completed in the first half of fiscal 2021.
The Nobilo Wine brand, for the trailing 12 months ended 31 August 2019, generated volume of nearly 550,000 cases, with net sales of around $40 million.
Bill Newlands – Constellation Brands president and CEO said: “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.
“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.”
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