Major Wine Firm Joins Bid for Supplier
A management group that wants to buy bulk wine producer Golden State Vintners Inc. has raised its bid with help from Constellation Brands Inc., the world’s largest wine company.
The entry of the maker of the Almaden and Vendange labels essentially pits two of the biggest players in the mass-market wine sector against each other.
Until Thursday, Golden State looked as if it would be acquired by Wine Group of San Francisco, which owns the Franzia, Corbett Canyon and Glen Ellen brands. But according to a Securities and Exchange Commission filing made public Thursday, the Golden State board has accepted the latest offer from its chief executive, Jeffrey O’Neill. Constellation, based in Fairport, N.Y., helped him finance the offer of $7.80 a share, or $77 million, plus the assumption of $29 million of debt.
That tops a $7.75-a-share all-cash offer made last week by Wine Group.
Wall Street, however, still expects more. Golden State’s shares rose 5.5%, or 43 cents, to $8.23 on Nasdaq on Thursday. Though the board has agreed to O’Neill’s latest offer, the company said in a statement that it was obligated to consider other bids until April 22.
In fact, there have been several go-rounds since bidding started with a $6.85-a-share offer by O’Neill Acquisition Co. in early March. At one point, the privately held Wine Group said it was pulling out, only to come back with a higher offer two weeks later.
Golden State went public in 1998 at $17 a share.
On Thursday, Wine Group executives declined to say what their next step would be. O’Neill and Golden State also declined to comment.
Golden State is an important supplier of bulk wine to Constellation Brands, which owns upscale labels such as Franciscan and Simi. Constellation, which sells about $3.5 billion in beer, wine and spirits annually, accounts for 14.5% of California’s wine production.
Several industry analysts said that backing O’Neill’s proposal to take over Golden State was a comparatively inexpensive way for Constellation to lock up a key supplier and block the expansion of a major rival. A combined Golden State-Wine Group would control about the same amount of the state’s wine production -- about 29 million cases -- that Constellation does now.
“This is a solid strategic move by Constellation,” said Robert Nicholson an investment banker with International Wine Associates in Healdsburg, Calif. “Having a piece of the company secures their position.”
Constellation has “a long relationship” with O’Neill’s company, said Mark Maring, a Constellation spokesman. He declined to disclose how big an investment Constellation was prepared to make. The SEC filing provided no details other than listing Constellation as one of nine “equity sponsors” in the transaction.
Maring said Constellation was interested in seeing current management remain in charge of Golden State.
Golden State owns 4,270 acres of vineyards and four wineries in the San Joaquin Valley and Monterey County; it also leases a winery and bottling plant in Napa, Calif. In the first six months of its current fiscal year, Golden State earned $6.1 million on revenue of $52 million, compared with a profit of $4.1 million on sales of $49.2 million in the year-earlier period.
The O’Neill team has said it would take Golden State private. Wine Group hasn’t said what it would do with the company.
