Rival Firm Offers $1 Billion for Mondavi
Constellation Brands, one of the largest players in the wine business, today confirmed it has offered to buy legendary California winemaker Robert Mondavi Corp. for about $1 billion in cash.
The acquisition would include Mondavi’s landmark Oakville winery in Napa Valley that makes $125 bottles of Cabernet Sauvignon and its massive Woodbridge operation near Lodi, Calif., which turns out 8 million cases a year of inexpensive wine
The offer comes one day after Mondavi, which put itself on the auction block last month amid plunging profits and slumping sales, said it had received an unsolicited offer but did not identify the bidder.
Under its offer, Fairport, New York-based Constellation Brands would buy the company’s publicly traded stock, known as Class A, for $53 a share in cash-or 37% more than the company’s closing stock price on Monday. In addition, Constellation Brands would purchase Mondavi’s Class B stock for $61.75 a share in cash.
In trading today, Mondavi shares soared more than 30% to close at $51.88 on the Nasdaq. Shares of Constellation Brands lost more than 8% on the New York Stock Exchange to close at $36.25.
As part of the deal, Constellation Brands would also assume $333 million in Mondavi debt.
On Monday, Mondavi Chief Executive Craig Evans characterized the bid as a proposal that was not firm and could be changed. After reviewing the offer Monday, the company’s board of directors decided not to reject it out of hand, Mondavi Chairman Ted Hall said.
Rather, it will be considered along with another plan by the company to unload the famous Mondavi winery and brand, along with other high-end vineyards and labels, but keep part of the company that sells wines that retail for less than $15 a bottle.
Hall said the board would base its decision on which strategy would “create the most value for shareholders.”
The board declined a request by the bidder to delay a recapitalization of the business that was expected to reduce the founding Mondavi family’s voting control of the company from 85% to 40% by converting a two-tier stock structure into a single class of shareholders.
Changing to a “one share, one vote” structure -- expected to be approved at the company’s Nov. 30 annual meeting — would allow the board to “act upon all our options,” Hall said.
One of the best-known names in the business, Mondavi has holdings from Napa to Tuscany, Italy, and would be attractive to a number of large wine companies, analysts said. Even before this latest announcement, analysts said it might make sense for a rival to purchase the whole business rather than just the luxury brands and assets.
Mondavi’s financial performance has sagged in recent years as competition for inexpensive wine heated up and a slow economy hurt sales of premium vintages. Profit plunged from a peak of $43 million in fiscal 2001 to $26 million in fiscal 2004, a 39.5% slide. Sales fell 7.5% over the same period, from a high of $506 million to $468 million.
In addition to Constellation Brands, Allied Domecq and Pernod Ricard have been mentioned as possible bidders.
Constellation, which generated nearly $4.5 billion in revenues during its most recent fiscal year, produces or markets a wide variety of wines, including such brands as Almaden, Manischewitz, Estancia Winery and Columbia Winery. The company also markets and producers beers and other products.
