Mondavi to Join Constellation in $1 Billion Deal

Wine giant increased its offer for the entire company
Nov 3, 2004

Robert Mondavi Corp. has agreed to be acquired by beverage giant Constellation Brands in a $1.03-billion cash deal, ending a plan to split up one of California's most famous wine companies. While the Mondavi family will lose control of their brands, founder Robert Mondavi will remain involved under Constellation.

The merger agreement, which was announced just after the stock market closed today, follows a mid-October bid by Constellation to buy the entire Mondavi company for $970 million. Fairport, N.Y.-based Constellation, which is second-largest wine producer in the United States, is also involved in a three-way partnership to take over California's Chalone Wine Group in an agreement that was finalized earlier this week.

Mondavi's board of directors had been planning since September to sell off the luxury side of the business, which includes wineries such as Robert Mondavi, Opus One and Ornellaia, and focus on its less-expensive brands, such as Woodbridge. Board members were initially noncommittal in their response to Constellation's proposal and said they intended to continue to evaluate other options. That prompted some Mondavi shareholders, who believed Constellation's offer was highly attractive, to file lawsuits against the company. The board reconsidered its position after Constellation upped its bid.

Constellation will acquire all the outstanding shares of Mondavi for $56.50 per share for Class-A common stock and $65.82 for the Class-B shares, which are held by members of the Mondavi family. That's up from its original offer of $53 and $61.75, respectively, as Mondavi's stock price has soared since the public disclosure of the bid. (Mondavi's closing price on NASDAQ today was $54.75, while Constellation's stock closed at $41.55 on the New York Stock Exchange.) Constellation will also assume $325 million of Mondavi debt.

"After careful consideration of our strategic alternatives, our board of directors concluded that this transaction with Constellation is in the best interests of the Robert Mondavi Corp.'s shareholders, employees and the Robert Mondavi brand," said Mondavi chairman Ted Hall.

Though Mondavi has been struggling in recent years, Constellation believes that its vast distribution network will help boost the business. It already owns respected California brands such as Franciscan Oakville, Ravenswood and Simi, in addition to its mass-market wines such as Almaden, Arbor Mist and Paul Masson. "We're committed to further enhancing the prestige of the flagship Robert Mondavi winery, as well as giving it the recognition it deserves throughout the world," Sands said.

The deal is subject to shareholder approval, and the companies expect to complete the transaction by the end of 2004 or early 2005. Mondavi has postponed its Nov. 30 annual meeting, as it is no longer proceeding with a shareholder vote on its proposed reincorporation and recapitalization plan.

While the Mondavis will no longer control the wine company, at least one family member will remain involved. Robert Mondavi, who founded his namesake winery in 1966, will serve as a "brand ambassador" working from Napa Valley, Constellation CEO Richard Sands said.

The company has yet to define what role, if any, will played by Robert Mondavi's children, who had indicated that they were interested in trying to buy part of the company if it was going to be split apart. This fall, Michael resigned both as vice chairman and as a board member. Tim also has resigned as vice chairman, but remains consulting winegrower and a member of the board. Their sister, Marcia Mondavi Borger, is also on the board.

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