Gallo acquisition

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Gallo finalizes blockbuster $810 million wine deal with Constellation Brands

E. & J. Gallo Winery announced Tuesday it completed an acquisition of low-price wine brands from Constellation Brands Inc., in a scaled-back $810 million deal that still is one of the biggest in the U.S. wine industry.

The transaction originally was valued at $1.7 billion when first announced in April 2019. However, regulators balked and forced the two alcohol beverage giants to shrink the deal to preserve competition in the U.S. wine industry. Gallo is the country’s largest wine company, and with this sale Constellation Brands drops two spots to No. 5 nationwide.

As part of its purchase, Gallo picks up the Clos du Bois winery in Geyserville and the brand. Ravenswood and Mark West wines, which began in Sonoma County and now are produced elsewhere, also are included.

“The closing of this transaction represents our company’s long-term commitment to the wine industry,” Ernest J. Gallo, chief executive of the Modesto-based, family controlled Gallo business, said in a statement.

To gain approval from the Federal Trade Commission to clear the way to close the deal, Constellation a year ago agreed to a major concession. Constellation would not sell to Gallo Cook’s California Champagne, J. Roget American Champagne and Paul Masson Grande Amber Brandy brands. They would have given Gallo a large slice of the sparkling wine market. The companies also made other more minor concessions to finally get FTC final approval last month.

Still, the acquisition expands Gallo’s reach and leadership in the domestic wine industry.

“You have a behemoth that's going to be bigger,” said Rob McMillan, executive vice president of Silicon Valley Bank’s wine division in St. Helena.

Under final terms, Gallo bought five wineries from Constellation and more than 30 U.S. wine brands, such as Arbor Mist, Black Box, Estancia, Franciscan, Hogue, Manischewitz, Taylor, Vendange and Wild Horse. Gallo also gets the Nobilo New Zealand sauvignon blanc wine brand in an separate transaction with Constellation.

The American brands Gallo added all sell at a price range of $11 a bottle or less. This cheap wine segment is experiencing declining growth, compared to the more robust nation’s premium wine market centered in Sonoma and Napa counties.

According to research by wine sector consultant Jon Moramarco, Gallo brands now represent almost 30% of all bottles of wine produced in California, by far the country’s largest producer. Last year, Gallo’s share was at 24.4%. Meanwhile, Constellation drops from 12% to 6.5% of the state’s wine wine production.

An estimated 81% of all U.S. wine is produced in the Golden State. In 2019, wine shipments nationwide had a retail value estimated at $75.1 billion, a figure that also includes imports.

A former executive at Constellation Brands, Moramarco said the blockbuster wine deal fits the objectives of both companies.

For privately held Gallo, the family can play the long game to help revitalize some of the cheaper wine brands that have lost their luster. And it gives the company more wineries to increase wine production capacity for the future, analysts said.

Completing the deal gives certainty to wholesalers, retailers and grape growers across the state who know Gallo finally is taking over these low-end Constellation wine assets, analysts said. If Gallo indeed opts to reinvest in some of these brands, grape growers in regions outside the North Coast premium wine market would be the likely beneficiaries, said Moramarco, citing Central Valley growers.

In recent years, Gallo was primarily focused on buying premium wine assets in Sonoma and Napa counties, such as J Vineyards & Winery in Healdsburg and the Napa Valley brands of William Hill Estate and Orin Swift, plus the 600-acre Stagecoach Vineyard in the Atlas Peak region in Napa County.

McMillan said Gallo doesn’t have to be concerned about quarterly sales and profit growth and meeting financial targets to please Wall Street.

That’s not the case for Constellation, a publicly traded company based in Victor, New York. Its stock closed Tuesday at $216.89, up $0.15 in New York Stock Exchange trading. Propelled by the announcement of the deal closure with Gallo after stock trading ended for the day, Constellation’s shares rose $0.61 in after-hours trading to $217.50.

Constellation owns prime local properties such as the iconic Robert Mondavi Winery in Napa, for which it paid $1 billion in 2004, and Simi Winery in Healdsburg. The deal with Gallo reinforces its goal to focus primarily on premium brands that have good potential for growth, while offloading underperforming wine assets.

Also, Constellation is a big player in the beer and spirits business — notably its U.S. distribution of Corona and Modelo beers — and jumped into the legal marijuana market in 2017 with a $190 investment in Canopy Growth Corp., a Canadian cannabis beverage products company. To date, Constellation has plowed $4 billion into Canopy, but the firm has so far struggled to reach its potential.

Bill Newlands, CEO of Constellation, said acquiring assets from Gallo and other recent deals “positions our wine and spirits business for accelerated revenue growth and operating margin performance going forward.”

Driven by consumer taste for premium alcoholic beverages, ”these moves align with our vision of building a winning portfolio of bold and distinctive higher-end brands,” Newlands said.

Meanwhile, Gallo did not reveal details Tuesday about its plans for once beloved brands, such as Clos du Bois and Ravenswood, though it promised better days.

“We recognize that these are iconic brands within their categories that resonate with consumers,” said Lon Gallagher, a Gallo spokesman. “We plan to respect the legacy of these brands, while devoting our efforts to revitalizing brands and continuing to make the highest quality wine.”

You can reach Staff Writer Bill Swindell at 707-521-5223 or [email protected] On Twitter @BillSwindell.

Bill Swindell

Business, Beer and Wine, The Press Democrat  

In the North Coast, we are surrounded by hundreds of wineries along with some of the best breweries, cidermakers and distillers. These industries produce an abundance of drinks as well as good stories – and those are what I’m interested in writing. I also keep my eye on our growing cannabis industry and other agricultural crops, which have provided the backbone for our food-and-wine culture for generations.

Sours: https://www.pressdemocrat.com/article/business/gallo-finalizes-blockbuster-wine-deal-with-constellation-brands/

Gallo inks $1.7B agreement to buy about 30 Constellation wine, spirits brands

In a deal that has been rumored for months, New York-based Constellation Brands Inc. (NYSE: STZ and STZ.B) on Wednesday announced it inked a $1.7 billion agreement to sell around 30 wine and spirits lower-priced brands and related facilities to E. & J. Gallo Winery.

The deal includes brands with a retail price largely of under $11 and facilities in California, New York and Washington. Subject to regulatory approval, the transaction is set to close at the end of the company’s first quarter of fiscal 2020, which is in May.

“One of the hallmarks of our success over the years has been our ability to evolve and stay on the forefront of emerging consumer trends,” said Bill Newlands, president and CEO, in the announcement. “This decision will help enhance organizational focus on a more premium set of wine and spirits brands that better position our company to drive accelerated growth and shareholder value. In turn, Gallo is acquiring a collection of great brands that complement their operational model and business strategy to provide quality products to consumers at every price point.”

Constellation’s remaining wine and spirits portfolio would include Robert Mondavi brand family; The Prisoner Wine Company brand family; Kim Crawford, said to be the No. 1 selling sauvignon blanc in the U.S. market; Ruffino, a family of Italian wines; Meiomi, the No. 1 selling pinot noir in the U.S.; and SVEDKA Vodka, the top selling imported vodka in the U.S.

Reuters in October reported that Mark West and Clos Du Bois were among the wine brands Constellation was looking to sell. Estimated deal value at that time was about $3 billion.

Constellation purchased the Mark West brand in 2012 from what's now Purple Wine + Spirits in western Sonoma County for $163 million and the Blackstone brand from Purple in 2001 for $144 million.

Purple Wine founder Derek Benham told the Business Journal in December that key to the sale of Mark West was a desire to move the company portfolio upscale, out of the $10- to $12-a-bottle "fighting varietal" brand model that had been successful.

And Constellation along with other major players in wine has been focusing on moving its own portfolio to higher-priced wines where sales growth has been faster, an industry trend commonly called "premiumization." The New York-based company also has been putting a bigger emphasis for its growth on craft beer and cannabis in the past couple of years, including a $4 billion investment last year in Canada's Canopy Growth.

Constellation’s remaining portfolio also includes a collection of high-end brands such as Simi, Schrader Cellars and Mount Veeder Winery wine brands, and High West Whiskey and Casa Noble Tequila, as well as new premium wine innovations such as Cooper & Thief and Spoken Barrel.

Gallo, too, has been positioning itself toward the higher end for more than a decade, including acquisitions of prime North Coast vintners and vineyards. Gallo's premium wine division includes Napa Valley's 600-acre prime Stagecoach Vineyard, acquired in 2017, plus J Vineyards & Winery, Orin Swift and Louis M. Martini Winery.

“While we continue to invest in our premium and luxury businesses, we see a tremendous opportunity with this acquisition to bring new consumers into the wine category,” said Joseph E. Gallo, CEO, in Gallo's announcement of the deal. “We will continue to provide our customers and consumers with quality products at every price point.”

Gallo's portfolio is set to top 100 brands including acquisitions from the North Coast: Barefoot Cellars and Chateau Souverain.

Jeff Quackenbush covers wine, construction and real estate. Contact him at [email protected] or 707-521-4256.

Sours: https://www.northbaybusinessjournal.com/article/industry-news/gallo-inks-1-7b-agreement-to-buy-about-30-constellation-wine-spirits-bran/
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Completion of $810M Gallo-Constellation wine portfolio deal should stabilize grape, distribution networks: expert

Clos du Bois from Sonoma County and Franciscan from Napa Valley were among the 32 lower-priced wines Constellation Brands just sold to E. & J. Gallo Winery. (courtesy of E. & J. Gallo Winery)

E. & J. Gallo Winery and Constellation Brands (NYSE: STZ and STZ.B) on Tuesday announced the completion of the sale of 32 brands, including several based or launched in the North Coast.

It’s a key milestone in Constellation’s multiyear move toward a more upscale portfolio, while it gives Gallo more wines in the under-$11-a-bottle category and additional wineries in which to make them.

First announced in April 2019 as a $1.7 billion sale, the deal took nearly two years to close, as regulators at the Federal Trade Commission objected to the concentration of so much sparkling wine, brandy, dessert wine and concentrate with Gallo. The agency green-lighted the revised deal Dec. 23 after several brands and business lines were excluded.

The long delay disrupted grape supply and wine distribution channels related to these brands, according to Mario Zepponi, founder of Santa Rosa-based Zepponi & Company, a major wine industry mergers and acquisitions firm.

The delay created uncertainty in the grape markets that supports the brands acquired by Gallo,“ Zepponi wrote in an email. ”It created even greater havoc in the wholesale channels due to Gallo’s push to reposition the brands with its wholesalers in several markets. These areas of the industry should begin to settle down now that the Constellation‑Gallo transaction has closed.“

He said Constellation now can focus on investing in premiumization of its portfolio. That now includes Robert Mondavi-related labels; The Prisoner Wine Company; top-selling sauvignon blanc and pinor noir brands Kim Crawford and Meiomi, respectively; Simi; Schrader Cellars; and Mount Veeder Winery. Spirits brands include Svedka vodka, Casa Noble tequila and High West whiskey.

The acquisition includes five wineries in California, Washington and New York plus Constellation’s Polyphenolics business, which makes MegaNatural health products made from wine, grape and seed extracts. One of those wineries is Clos du Bois’ facility in northern Sonoma County.

But while that Geyserville facility will continue to be where the brand is made, it will no longer host consumers for tastings — even when that’s again possible in Sonoma County as the current surge in coronavirus cases eases. Gallo will not operate the Clos du Bois, Hogue Cellars or Wild Horse tasting rooms, according to the company.

“We value the loyal consumer following that these brands have and will continue to support direct to consumer sales to their fans,” Gallo told the Business Journal in a statement.

The company said it is evaluating how it will integrate the new brands — including other North Coast-originated brands Franciscan, Ravenswood, Mark West and Blackstone — and optimize its operations in California coastal regions.

“These are iconic brands within their categories that resonate with consumers,” Gallo told the Journal. “We are excited about the strong presence these brands have throughout the US and around the world. We plan to respect the legacy of these brands while devoting our efforts to revitalizing brands and continuing to make the highest quality wines.”

Part of the December consent order that allowed the Gallo-Constellation deal to finish included Gallo’s pending sale of its Fairbanks and Sheffield dessert wines to Precept Brands for an undisclosed amount.

Constellation sold its grape concentrate business to Vie-Del Company. An approved $255 million deal to sell Paul Masson Grande Amber brandy to Sazerac is set to close later this month.

Sours: https://www.northbaybusinessjournal.com/article/industrynews/completion-of-810m-gallo-constellation-wine-portfolio-deal-should-stabiliz/
Gallo Careers: Total Rewards

SND: Gallo Closes Mega-Deal with Constellation Brands

It's been a long time coming, but E.&J. Gallo has closed its acquisition of more than 30 wine brands and five wineries from Constellation Brands. The final price was approximately $810 million, consisting of approximately $560 million in cash paid at closing and up to $250 million in earnouts if brand performance targets are met over a two-year period after closing, according to Shanken News Daily, a sister publication of Wine Spectator.

The deal has been in the works for more than a year, held up as the companies worked with the Federal Trade Commission (FTC) to tweak it to win approval. The delay left some brands in limbo.

The sale is part of Constellation's effort to focus more on premium wine brands. Gallo sees potential in the value-oriented wine brands. The deal includes Arbor Mist, Black Box, Clos du Bois, Estancia, Franciscan, Hogue, Manischewitz, Mark West, Ravenswood, Taylor, Vendange and Wild Horse that will join the Gallo portfolio. With the acquisition, Gallo will also expand its winemaking footprint with the addition of five wineries located in California, Washington, and New York. Gallo is also acquiring the Nobilo New Zealand Sauvignon Blanc brand in a separate transaction with Constellation, for $130 million.

For more on the sale and what executives at both companies hope to accomplish, check out the full story at Shanken News Daily.

NewsEconomyWinery Purchases and SalesCaliforniaNew ZealandUnited StatesWashingtonNew York

Sours: https://www.winespectator.com/articles/gallo-closes-mega-deal-with-constellation-brands

Acquisition gallo

E. & J. GALLO WINERY COMPLETES ACQUISITION OF MORE THAN 30 BRANDS FROM CONSTELLATION

MODESTO, Calif. Jan. 5, 2021 – E. & J. Gallo Winery (Gallo) today announced that it has completed the acquisition of more than 30 wine brands from Constellation Brands, Inc. The closing of the agreement between Gallo and Constellation was approved by the Federal Trade Commission on December 23, 2020.

The acquisition includes well known wine brands such as Arbor Mist, Black Box, Clos du Bois, Estancia, Franciscan, Hogue, Manischewitz, Mark West, Ravenswood, Taylor, Vendange, and Wild Horse that will join the Gallo portfolio. With this acquisition, Gallo will expand its operational footprint with the addition of five wineries located in California, Washington, and New York, along with Constellation’s Polyphenolics business. Gallo will also acquire the Nobilo New Zealand Sauvignon Blanc brand in a separate transaction with Constellation.

“The closing of this transaction represents our company’s long-term commitment to the wine industry,” said Chief Executive Officer, Ernest J. Gallo. He added, “We are pleased to welcome the new employees joining the Gallo family.”

The acquisition was first announced by Gallo and Constellation on April 3, 2019. Pursuant to the FTC consent order, Gallo will also divest two of its legacy dessert brands, Fairbanks and Sheffield, to Precept Brands LLC. Terms of the transaction between Gallo and Precept were not disclosed.

About E. & J. Gallo Winery

Founded in 1933 by brothers Ernest and Julio Gallo, E. & J. Gallo Winery is a family-owned company and global wine and spirits industry leader. The hallmark of E. & J. Gallo Winery is their lasting commitment to sustainability and quality, and consistently providing wine and spirits for every occasion. Gallo’s range of offerings includes Apothic, Barefoot Wine, Black Box, J Vineyards and Winery, La Marca Prosecco, Orin Swift, New Amsterdam Vodka, RumChata, High Noon, along with partnerships with esteemed family-owned brands such as Allegrini, Argiano, The Dalmore, Diplomatico, Don Fulano, and Grupo Montenegro.

Back to press

Sours: https://www.gallo.com/press/2021-01-05-ej-gallo-winery-completes-acquisition
Ep 213 The Backstory Behind E\u0026J Gallo’s Acquisition of Barefoot Cellars

Gallo finalizes $810 million purchase from Constellation, one of the biggest wine acquisitions in modern history

They subsequently amended the agreement, bringing the transaction cost down to about $810 million, according to Constellation. They had to exclude sparkling wines and brandy, plus a winemaking facility, from the new deal. In a separate transaction that was initiated in 2020, Constellation is selling Gallo its Nobilo Sauvignon Blanc brand from New Zealand for $130 million.

Even in its more modest form, however, the deal still represents one of the most significant wine acquisitions in modern history. Constellation — the country’s third-largest wine producer, based in upstate New York — is essentially offloading inexpensive brands, mostly priced at $11 or less a bottle, as it attempts to focus its efforts on the premium price segment of the market, which has been steadily growing in recent years. As part of that strategy, Constellation purchased the California wine brands Booker Vineyard, Kerr Cellars (from golfer Christie Kerr) and Empathy Wines in 2020.

Meanwhile, for Gallo — the country’s largest wine producer, based in Modesto — the acquisition of brands including Arbor Mist, Black Box, Estancia, Franciscan and Hogue allows it to continue establishing dominance in the lower-price tiers, where it already performs strongly with Barefoot, Boone’s Farm and other wines.

“Research shows that most consumers enter the wine category through the under-$11 category,” said Lon Gallagher, spokesperson for Gallo. “While we continue to invest in our premium and luxury wine businesses, we see a tremendous opportunity with this acquisition to bring new consumers into the wine category.” Gallo’s 2019 purchase of Pahlmeyer, a Napa winery whose wines sell for $100 and more, shows that it isn’t shying away from the higher-end wine market either.

The FTC wanted to ensure that the two companies would remain competitive with each other. To that end, it is requiring that Constellation retain its sparkling wine Cook’s for at least four years in order to compete with André, Gallo’s low-priced sparkling wine. Constellation had hoped to sell Gallo its J. Roget sparkling wine brand, but the FTC has said that Constellation must keep it for at least four years in order to compete with Gallo for the share of on-premise sparkling wine sales at places like restaurants, casinos and hotels.

Similarly, the FTC did not permit the brandy Paul Masson to pass from Constellation to Gallo, which has been developing a major presence in the domestic brandy market. (Among Gallo’s big moves lately was the purchase of Germain-Robin in 2017.) Instead, Constellation will sell Paul Masson to Sazerac Co. The FTC has also asked Gallo to divest two low-priced dessert wines — Sheffield Cellars and Fairbanks — to Precept Brands.

Gallo and Constellation are also the country’s two largest producers of high-color concentrates, a grape-based syrup used widely by wineries to adjust the color and flavor of wines. Constellation must now sell its concentrate business to the only other producer of concentrate in the U.S., Vie-Del Co.

Esther Mobley is The San Francisco Chronicle’s wine critic. Email: [email protected] Twitter: @Esther_mobley

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Sours: https://www.sfchronicle.com/wine/article/Gallo-s-810-million-buyout-of-Constellation-s-15848584.php

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