The aftershocks continue to reverberate from Constellation Brands' $1.3 billion acquisition of Robert Mondavi Corp. The Fairport, N.Y.-based drinks giant is close to completing the sale of two small, but prominent pieces of the Mondavi portfolio: Sonoma's Arrowood Vineyards for an expected $25 million, and Byron, in Santa Barbara, for an expected $15 million. Both are to be purchased by Legacy Estates Group, which also owns Freemark Abbey in Napa Valley.
While Arrowood Vineyards sent out a statement today announcing the completion of its sale to Legacy Estates, officials at the company, which has been negotiating with Constellation for several months, said nothing has been signed yet.
While the deal is not finalized, insiders say it includes the rights to four brands: Arrowood; its second label, Grand Archer; Byron and Io, a blend of red Rhône varieties from Santa Barbara. Legacy Estates would also acquire current inventory, the Arrowood winery and 10 acres of estate vineyards in Glen Ellen, and Byron's production facility and 370 acres of vineyards in Santa Maria Valley.
St. Helena, Calif.-based Legacy Estates, which was founded by brothers Calvin and Dev Sidhu and other partners, has been actively seeking new wineries over the past few years. The company was started in 2001 with the acquisition of Freemark Abbey, which is best known for Rutherford Cabernet Sauvignon and whose wines retail for $25 to $65.
According to the Arrowood statement, winery founders Richard and Alis Arrowood will stay on with the company, Richard as Arrowood's director of winemaking and Alis providing sales and marketing support. It is expected that Byron winemaker Jonathan Nagy, who was trained by estate founder Ken Brown, would also continue to oversee production.
The Arrowoods founded their winery in 1987 and struck a deal in 2000 for Mondavi to take it over for $45 million--$20 million more than Constellation is getting for it now. Arrowood currently makes 25,000 cases to 30,000 cases a year from estate and purchased Sonoma grapes. About one-third of the production is Cabernet Sauvignon, and the balance is mostly Chardonnay, Syrah and Merlot. Retail prices range from $18 for the Grand Archer Chardonnay up to $85 for the Arrowood Cabernet Sauvignon Réserve Spéciale.
Byron's current output is about 35,000 cases a year, nearly all of which is Pinot Noir and Chardonnay. Prices usually range between $25 and $50 a bottle. Ken Brown began the estate in 1984 and sold it to Mondavi in 1990 (three years before it became a publicly traded company, so the sale price was not disclosed). He left in June 2004 to concentrate on his own brand, called Ken Brown Wines. He had a consulting arrangement with Mondavi in exchange for reduced fees for custom-crush privileges at the Byron facility. That arrangement is expected to continue.
Negotiations between Mondavi and Legacy Estates began last summer. In September, Mondavi officials first disclosed plans to sell Arrowood and Byron, along with the company's other high-end assets, such as Opus One and the Robert Mondavi Winery in Oakville. But talks went on hold in October, when Mondavi received a takeover bid from Constellation, whose holdings include Ravenswood, Almaden and Corona beer. Still, the sale plans were reiterated in a public filing in November after Mondavi's board of directors accepted Constellation's higher offer of $1.03 billion in cash and an additional $300 million to retire company debts. Shareholders approved the deal on Dec. 22.