Constellation is contributing about $80 million in assets, including its Riverland winemaking facility in Monterery County, 1,400 acres of Monterery vineyards and its Farallon brand from California. For its 50 percent stake, Hardy will pay Constellation $32 million and contribute the U.S. distribution rights to seven brands, including Banrock Station, Hardys, Leasingham, Barossa Valley Estate and Chateau Reynella -- all from Australia -- as well as Nobilo from New Zealand and La Baume from France.
The deal is the latest move in the ongoing worldwide consolidation of the wine industry.
"I think it's a very interesting combination of strengths that will make a big difference in the sales of U.S. and Australian wines in the United States," said Richard Sands, CEO of Constellation, a publicly traded company.
Key to the new company's success, Sands believes, is bringing a distinctly Australian sense of winemaking to California grapes. Fruit-forward Aussie wines in the $8 to $12 price range are among the best-selling imports in the United States. Hardy's winemakers will oversee winemaking at the California facility.
"We could have to put together the same old California winemaking team of UC Davis graduates," Sands said. "But we thought it would be very interesting to bring in another winemaking style."
Constellation, formerly known as Canandaigua Brands, has been on a buying spree recently. Once best known for jug wines such as Almaden and Paul Masson, the company, which has a market value of about $1.56 billion, has purchased more prestigious names such as Ravenswood and Simi wineries in Sonoma County, Napa Valley¿based Franciscan Estates and Washington's Columbia and Covey Run labels.
Hardy has had its eye on California for some time. The company, which has a market value equivalent to US$709 million, was a vocal suitor for Kendall-Jackson Wine Estates until the Sonoma County winery took itself off the market in May.
When operations begin in August, Pacific Wine Partners will start with 700,000 cases in annual sales, with about 150,000 cases of that from the Farallon brand and the rest from sales of existing Hardy brands. The company's goal is to increase to 5 million cases within the decade, partly by expanding production of the current brands. "In addition, we'll either buy or create new brands to be produced in the Australian style, and ultimately we expect those brands will produce 2 to 3 million cases," said Sands.
José Fernandez, who joined BRL Hardy North America last year as CEO, will head Pacific Wine Partners. Fernandez previously had been president and CEO of Southcorp's North American division. Employees from both companies will be members of the executive team.
This isn't the first joint venture between California and Australian wineries. The Seven Peaks label is a joint venture between Aussie wine giant Southcorp and California's Paragon Vineyard. Likewise, Robert Mondavi Winery and Rosemount Estates announced last October that they would be working on projects in tandem.
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