Foster's Buys Beringer in Blockbuster $1.5 Billion Deal

Aug 28, 2000

In a deal that will create the world's largest premium wine company, Foster's Brewing Group in Australia is acquiring Beringer Wine Estates in California's Napa Valley for $1.5 billion, making it the largest wine company sale in both U.S. and Australian history.

The acquisition will combine Beringer Wine Estates with Foster's wine subsidiary, Mildara Blass. BWE owns some of California's top wineries, including Beringer, Chateau St. Jean, Chateau Souverain, Meridian, St. Clement andStags' Leap Winery; it also owns 10,200 acres of vineyards in California.

Mildara Blass owns some of Australia's best-selling wines, including Wolf Blass, Black Opal, Greg Norman Estates, Jamiesons Run and Yarra Ridge. The company sells wine in 67 countries.

The combined revenues of Beringer and Mildara Blass for fiscal year 2000 (ending June 30) total $886 million.

"This represents a new, very exciting chapter for Beringer Wine Estates, and we are proud to be on the forefront of the globalization of the premium wine industry," said Beringer's chairman and CEO, Walt Klenz. "This combination gives us a business partner with a similar philosophy and will provide us with access to new markets and new business opportunities, which assures Beringer Wine Estates' place as a key player in the world's premium wine industry."

"This is a defining moment for Foster's," added Ted Kunkel, Foster's president and CEO. "We searched the world for a suitable wine acquisition, and Beringer Wine Estates was the absolute standout. It is a first-class company which has a strong track record due to the quality of its assets and management's expertise in brand building and marketing."

Under the terms of the agreement, Foster's will pay $1.2 billion for Beringer Wine Estates and will assume the company's debt, bringing the transaction value to $1.5 billion, or $55.75 per share of Beringer stock, the companies said.

Beringer Wine Estates will become a wholly owned subsidiary of Foster's, but the California company's organizational structure and senior management team will remain unchanged. Klenz will stay on, though he will now report to Mildara Blass managing director Terry Davis; Beringer's head winemaker Ed Sbragia will also continue with the company.

Beringer, founded in 1876, has grown to become one of California's most prominent and successful wineries. It became a publicly traded company in 1997, and a majority stake is currently owned by Texas Pacific Group, a private investment partnership based in San Francisco, London and Fort Worth, Texas. The partnership, which has capital of approximately $7 billion, owns a broad range of investments, including stakes in Del Monte, Bally, Ducati, J. Crew, Continental Airlines and Oxford Health Plans.

Beringer has been a key player in the ongoing consolidation in the wine industry. It acquired Chateau St. Jean in 1996, Stags' Leap in 1997 and St. Clement in 1999, but sold off its Napa Ridge brand to Bronco Wine Co. early this year to focus on its faster-growing brands. For the past several months, the company was widely rumored to be considering some sort of deal with Kendall-Jackson Wine Estates.

Foster's dates back to 1886, when brothers William and Ralph Foster launched Foster's Lager. In 1996, Foster's entered the wine industry with its acquisition of Mildara Blass. The wine producer entered the California wine industry soon after; in 1997, it began making wines under the Bayliss & Fortune label and followed up with the purchase of 420 acres of vineyard land in Pope Valley in 1998. Earlier this year, Mildara Blass purchased Sonoma County's Windsor Vineyards -- a direct-sales winery that distributes more than 40 bottlings -- for $32 million.

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