A Sweeter Bid for a Napa Vintner
At wine auctions, it’s the rare vintages that get the most attention. In the hottest bidding war in Napa Valley, it’s a mass manufacturer.
Just a week after agreeing to be acquired for $67 million by a group headed by its chief executive, Golden State Vintners Inc. said Wednesday that it had a better offer -- $70.3 million -- from Wine Group, purveyor of the Corbett Canyon and Glen Ellen labels and the Franzia brand of wine-in-a-box.
But by the end of Wednesday, both bids had fallen short of investors’ expectations: Golden State’s shares rose 54 cents, or 8%, to $7.30 on Nasdaq.
CEO Jeffrey O’Neill’s team had proffered $6.85 a share, and Wine Group’s tender was $7.25 a share.
Rich Cartiere, editor of industry newsletter Wine Market Report, said the Golden State battle was turning into “a real-life version of ‘Falcon Crest,’ ” the 1980s prime-time soap opera filmed in Napa Valley.
He added that he wouldn’t be surprised to see the offers go even higher. Expect “more developments,” Cartiere said.
In a statement Wednesday, Golden State said it was prepared to cancel the pact it made with O’Neill’s group, which would force the company to pay $2.3 million in breakup fees and other expenses. O’Neill has until Tuesday to sweeten his offer to the company -- which was sued last week by shareholders who said they would be shortchanged by the O’Neill deal.
Golden State went public in 1998 at $17 a share.
Neither O’Neill nor executives with Wine Group would comment.
Based in Napa, Calif., Golden State supplies wine to the companies that own the Beringer and Sutter Home brands, and does private-label bottling for Safeway Inc. and other retailers.
Wine Group’s interest in Golden State comes at a time when the traditional jug-wine segment of the market is being challenged by the success of Bronco Wine Co.’s $1.99 Charles Shaw brand and the rapid growth of $4-to-$7-a-bottle wines with slick packaging and unconventional names such as Smoking Loon, Rex Goliath and Big House Red.
If it owned Golden State, San Francisco-based Wine Group would expand its capacity without having to jump the regulatory and environmental hurdles necessary to build new facilities.
“People are finding it easier to buy existing facilities than build new ones,” noted Nat DiBuduo, president of Allied Grape Growers in Fresno.
Indeed, California’s $14-billion wine industry is just starting to recover from a three-year grape glut that has slashed profits and prices for everything from wine to wineries.
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. In the first six months of its fiscal year, it posted a profit of $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 would take Golden State private. Wine Group, which is privately held, hasn’t revealed its plans. But a combined Golden State-Wine Group would control about 14% of the state’s wine production -- selling about 29 million cases, roughly the same as No. 2 Constellation Brands, owner of Blackstone, Franciscan, Ravenswood and other brands. E. & J. Gallo would still be the top producer, accounting for 28% of California’s wine production.
The battle for Golden State underscores the depth of the family ties and company relationships within California’s wine industry. For example, Wine Group Chairman Arthur Ciocca is married to a member of the Franzia wine family who is related to Fred Franzia, Charles Shaw czar and chief executive of Bronco Wine. Bronco, according to people familiar with the situation, has recently been eyeing Golden State but doesn’t have an offer on the table. And Fred Franzia is the nephew of Ernest Gallo, of Ernest and Julio Gallo fame.
