The aftershocks continue to reverberate from Constellation Brands' $1.3 billion acquisition of Robert Mondavi Corp. On Tuesday, the Fairport, N.Y.-based drinks giant sold two small but prominent pieces of the Mondavi portfolio: Sonoma's Arrowood Vineyards for $25 million, and Byron, in Santa Barbara, for $15 million.
Both wineries have been purchased by Legacy Estates Group, which also owns Freemark Abbey in Napa Valley. Of the $40 million, $20.5 million goes directly to Arrowood founders Richard and Alis Arrowood, to fulfill the provisions of their July 2000 sale agreement with Robert Mondavi Corp.
The deal 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 also acquires current inventory, the Arrowood winery along with 10 acres of estate vineyards in Glen Ellen, and Byron's production facility and 370 acres of vineyards in Santa Maria Valley.
"These brands are already well-received and recognized. Our idea is to give them some additional marketing and remind consumers what they are--small family wineries," said Legacy Estates CEO Calvin Sidhu.
Sidhu said that the company, which acquired Freemark Abbey in 2001, has actively sought new wineries over the past few years. "The opportunity to buy these two at one time is too much to pass up," he said, noting that Byron and Arrowood would complement Freemark Abbey, which is best known for Rutherford Cabernet Sauvignon and whose wines retail for $25 to $65.
Byron winemaker Jonathan Nagy, who was trained by estate founder Ken Brown, will continue to oversee production at the property.
Richard and Alis Arrowood have also agreed to remain in place for at least one year, Richard as Arrowood's director of winemaking and Alis providing sales and marketing support. After that they will reevaluate their options, Richard said. "I think the Sidhus are interested in quality and are not trying to be the biggest," he said. "So we've got that in common."
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.
Constellation executives decided that the two properties were not a good fit with their company, said Constellation spokesman Mike Martin. "When you look at our portfolio and the Arrowood and Byron brands, they're redundant with products and price points we already have," he said.
Legacy Estates began negotiating to buy the two wineries from Mondavi 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.