France-based Domaines Barons de Rothschild (Lafite) made a $62.4 million bid today to buy the 54 percent stake of publicly traded Chalone Wine Group that it does not already own. The deal is part of a joint venture it is planning with Constellation Brands and Napa Valley's Huneeus family.
The three partners are trying to create a high-end wine company that would bring together the brands in Chalone's portfolio with the Huneeus' Quintessa winery, a Napa vineyard owned by Constellation and a new Napa estate to be developed by the Rothschild group. If the deal is approved, Chalone Wine Group (CWG) will become privately held.
The bid caught the California wine industry off guard. CWG president and CEO Tom Selfridge said he only learned of the proposal over the weekend and told key personnel this morning.
"It's not a done deal just because there is an offer," Selfridge said. "For now, it's business as usual." Because Chalone is public, the deal must go through a rigorous approval process. A special committee of CWG's board will evaluate the proposal, and if it accepts the offer, Selfridge said, it will be put to a shareholder vote.
Domaines Barons de Rothschild (DBR), which is owned by the Rothschild family and Château Lafite Rothschild, already holds 46 percent of CWG. DBR president Christophe Salin is also chairman of CWG's board of directors, having replaced Philip Woodward in 2001.
DBR and Constellation Brands -- a global beverage giant that owns brands such as Franciscan Oakville, Estancia, Ravenswood, Simi, BRL Hardy, Almaden and Paul Masson -- will provide the cash to buy CWG's outstanding stock. They are offering $9.25 a share for 6.75 million outstanding shares, out of CWG's 12.5 million shares. The company also has a debt load of $70 million.
CWG, founded in 1972, includes California brands such as Acacia, Chalone, Echelon, Edna Valley, Jade Mountain and Provenance, as well as Washington's Canoe Ridge and Sagelands.
Agustin Huneeus Jr. was instrumental in putting together the deal, which has been in the works since November, when Huneeus resigned as chief executive of Franciscan Estates, Constellation's fine-wine division. Huneeus will oversee the yet-to-be named joint venture.
None of the parties would disclose how much money they would be investing individually or in total. The venture, by one insider's estimates, could be worth between $275 million and $325 million.
The Huneeus family plans to contribute the Quintessa winery, vineyards and brand to the venture, while Constellation would put in a 240-acre vineyard adjacent to Silver Oak winery in Oakville. DBR would also develop a new estate in Napa Valley, but no details were available about that project.
"Being a high-end winery is hard to do," Huneeus said, explaining why his family and Quintessa were looking for a partner. "This gives us the sort of distribution platform we need."
Constellation chairman and CEO Richard Sands declined to comment, but in a statement about the venture, he indicated the company wants to increase its involvement in the high-end wine market.
"We have been active participants over the past 15 years in Chalone's growth," DBR managing director Eric de Rothschild said in a statement. "We feel that this proposed transaction establishes a stronger, more influential independent company and will provide management, employees and distributors with continuity and the greatest potential for future expansion and success in this highly competitive market environment."
Read more about Chalone and the Huneeus family: