1st June, 2020
US drinks giant Constellation Brands has again revised the sale of its low-price wine brands to E&J Gallo to appease competition watchdogs.
The two companies have revised the original agreement to divest a portion of Constellation’s wine and spirits portfolio principally priced at $11 retail and below, including estates located in California, New York, and Washington.
Constellation’s Mission Bell winery in California, will not be included in the sale. This will support Constellation’s production needs, following its decision to retain Cook’s California Champagne and J. Roget American Champagne last year.
Constellation first announced plans to offload around 30 of its lower priced wine brands and related facilities to E&J Gallo in April 2019. The deal, first valued at $1.7bn, included wine brands in Constellation’s portfolio priced at US$11 and below per bottle, as well as six winemaking facilities.
By May, the deal was delayed after both companies received requests for additional information from the US Federal Trade Commission over “competitive concern primarily related to the sparkling wine, brandy, dessert wine, and concentrate categories”.
Now the deal has been lowered to value $1.03bn.
“This move puts us one step closer to finalizing this transaction,” said Bill Newlands, president and chief executive officer of Constellation Brands, adding that both companies are “fully committed to closing the transaction”.
The sale is expected to close next year, subject to FTC review and clearance.
Constellation also expects to close another deal with Gallo to divest its New Zealand-based Nobilo Wine brand and related assets for $130 million, by the end of the second quarter of 2021, subject to FTC review and clearance.
“Our wine and spirits transformation strategy continues to gain traction,” Newman said, “and we look forward to closing this transaction in the coming months.”