Chalone Accepts Takeover Offer

Napa Valley vintner Chalone Wine Group Ltd. has agreed to be acquired by the owner of the Chateau Lafite-Rothschild label in a complex deal that would create a new high-end California wine company.

Chalone and Domaines Barons de Rothschild said Monday that they signed an accord over the weekend calling for the legendary French vintner to pay $11.75 a share in cash for the 51% of Chalone that it didn’t already own and to assume $65 million in debt.

Rothschild would then set up a joint venture with Constellation Brands Inc., the world’s largest wine company, and the Huneeus family, which owns the Quintessa winery in Napa Valley, to sell Chalone and Quintessa wines and to develop an ultra-premium California Cabernet Sauvignon under the Rothschild label.

Richard Sands, Constellation’s chairman and chief executive, said the partnership would create “one of the strongest independent fine wine companies in the world.”

The proposed acquisition, which must be approved by Chalone shareholders, values the vintner at $158 million.

Rothschild has spent months trying to land Chalone; its first effort, in May, was worth about $112 million.

That bid, which Rothschild made with Constellation, was for $9.25 a share. Chalone stock promptly shot up to more than $10 a share on Nasdaq -- and $11.75 represents a 37% premium over the shares’ value before the bid in May.

As an added sweetener, all Chalone shareholders except Rothschild would receive a special one-time “wine dividend” good for a $1-a-share credit toward the purchase of bottles of Chalone wine.

All told, that would be nearly $7 million in wine credits.

On Monday, shares of Napa, Calif.-based Chalone rose $1.35, or 13%, to $11.69.

Under the terms of the joint venture deal, New York-based Constellation would contribute $52 million and a prime 240-acre vineyard in Oakville, Calif., to the enterprise. The Huneeus family’s contribution would be its winery.

Constellation would own 38% of the venture, the Huneeus family, 33%; and Rothschild, 29%. Agustin F. Huneeus would be named CEO.

Although all of the parties have signed on to the plan, the door is open for Chalone to solicit competing offers, so long as they come in at more than $11.75 a share. Rothschild must either match the price or vote its shares in favor of the higher-priced transaction, according to the deal signed over the weekend.

Chalone’s board of directors sought that clause because it believed Rothschild’s 49% stake in the company was dissuading others from making competing bids, a person familiar with the situation said. “This could open things up,” the person said.

In fact, this person said, Constellation’s unsolicited bid to buy Napa winemaker Robert Mondavi Corp. for $970 million has created more interest in Chalone as rivals ponder how they could compete with an ever-larger Constellation.

Constellation made the bid last month, just as Mondavi moved ahead with a restructuring plan to sell the landmark Mondavi winery in Oakville and other premium wineries and vineyards to concentrate on making wine that sold for less than $15 a bottle.

Mondavi’s board of directors is mulling over both the Constellation offer and its own restructuring plan and judging the interest of other parties that have inquired about purchasing either all or parts of the business.

Most analysts expect Constellation to increase its offer for Mondavi. Indeed, higher values have been the pattern of recent acquisitions of publicly held wine companies.

“We are at the beginning of a new phase of growth for the wine industry, and this is a good time to buy,” said Vic Motto, CEO of Global Wine Partners in St. Helena, Calif.

In April, Napa-based Golden State Vintners Inc. accepted an $82-million, or $8.25-a-share, buyout by Wine Group of San Francisco.

That followed a protracted bidding war and represented a 77% premium over where the stock traded before news of the bids became public.