Constellation Brands has agreed to revise the terms of a wine and spirits deal with E & J Gallo Winery to address competitive concerns raised by the US Federal Trade Commission (FTC).
As a result, three Constellation-owned brands – Cook’s California Champagne, J Roget American Champagne and Paul Masson Grande Amber Brandy – will be excluded from the deal, resulting in an adjusted transaction price of approximately $1.1 billion, of which $250 million is an earnout if brand performance provisions are met over a two-year period after closing.
The original transaction, which was announced in April, was valued at $1.7 billion.
“Both the Gallo and Constellation teams are committed to completing the transaction,” said Gallo CEO, Joseph Gallo. “We see a tremendous opportunity with this acquisition to bring new consumers into the wine category and look forward to integrating these brands into our portfolio and welcoming the new employees to our family winery.”
The modified deal is expected to be completed by 1 March 2020.
Combined, Cook’s, J. Roget, and Paul Masson Grande Amber Brandy sell approximately 5 million cases annually. As part of the ongoing transformation strategy for its wine and spirits business, Constellation is pursuing other opportunities to divest the brands and concentrate business excluded from the original agreement.
“We remain confident in our wine and spirits transformation strategy and we are committed to continuing to work with Gallo and the FTC to finalise this transaction,” said Bill Newlands, Constellation Brands CEO.
“We continue to focus our total portfolio to align with consumer-led premiumisation trends and growing segments of the market. We believe pursuing a revised agreement is in the best interest of the brands, our collective employees, business partners and consumers. We aim to close as soon as possible and look forward to a seamless transition while continuing to drive momentum in our respective businesses.”
In a separate transaction, Constellation has entered into an agreement with Gallo to divest the New Zealand-based Nobilo Wine brand and related assets for $130 million.
For the 12 months ended 31 August 2019, the Nobilo brand generated volume of approximately 550,000 cases, with net sales of nearly $40 million.
© FoodBev Media Ltd 2020