Constellation Brands and E & J Gallo finalise $810m wine deal

Constellation Brands has completed the divestment of more than 30 wine brands to E & J Gallo Winery, nearly two years after the deal was first announced.

The announcement of the deal closure follows approval by the Federal Trade Commission on 23 December 2020. The transaction was valued at approximately $810 million, consisting of $560 million in cash and up to $250 million in earnout payments dependent on brand performance.

The deal includes a portion of Constellation’s wine and spirits portfolio principally priced at $11 retail and below, as well as five wineries located in California, Washington and New York and the company’s Polyphenolics business.

As a result of the agreement, E & J Gallo has expanded its operational footprint and portfolio of offerings with brands including Arbor Mist, Black Box, Clos du Bois, Estancia, Franciscan, Hogue, Manischewitz, Mark West, Ravenswood, Taylor and Wild Horse.

The acquisition was first announced nearly two years ago in April 2019 for $1.7 billion, however, several months later terms were revised with many brands to be excluded from the deal to address competitive concerns.

In agreement with the Federal Trade Commission order, E & J Gallo will divest two of its legacy dessert brands, Fairbanks and Sheffield, to Precept Brands.

Following the deal, Constellation says it is looking to focus on consumer-driven premiumisation trends, with its remaining portfolio including brands such as Unshackled, High West barrel finished cocktails, Kim Crawford and Casa Noble Tequila.

“The closing of these deals positions our wine and spirits business for accelerated revenue growth and operating margin performance going forward,” said Bill Newlands, Constellation Brands’ president and CEO.

He added: “We continue to see the staying power of consumer-driven premiumisation trends, and these moves align with our vision of building a winning portfolio of bold and distinctive higher-end brands.”

E & J Gallo has also closed its separate – but related – transaction to acquire the Nobilo New Zealand Sauvignon Blanc brand and certain related assets from Constellation for approximately $130 million.  

In another separate transaction, Constellation has divested certain brands used in its grape juice concentrate business to Vie-Diel Company. Meanwhile, the company’s deal with Sazerac to offload its Paul Masson Grande Amber Brandy brand for approximately $255 million has been authorised by the Federal Trade Commission and is expected to close this month.