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Gallo, Constellation Revise Billion-Dollar Deal To Address FTC Concerns

December 12, 2019

Earlier this year, Constellation Brands agreed to sell approximately 30 brands from its wine and spirits portfolio to E.&J. Gallo for $1.7 billion, along with related facilities located in California, New York, and Washington. Today, the two parties announced a scaled-back version of the deal, which will now be worth $1.1 billion, of which $250 million is a performance-based earnout.

Under the newly revised terms, made to address FTC competition concerns, the brands Cook’s California Champagne, J. Roget American Champagne, and Paul Masson Grande Amber Brandy will be excluded from the transaction. Combined, those labels sell approximately 5 million cases annually, and Constellation will look to divest them elsewhere. The revised terms are still subject to FTC approval.

Also, separately, Constellation will now sell its Nobilo wine brand from New Zealand to Gallo for $130 million. Nobilo has volume of about 550,000 cases, net sales of $40 million, and gross profit less marketing of $19 million. Including Nobilo, the brands Gallo is acquiring from Constellation total 22 million cases, $860 million in net sales, and $330 million in gross profit less marketing.

“We aim to close as soon as possible and look forward to a seamless transition while continuing to drive momentum in our respective businesses,” said Constellation CEO Bill Newlands. Gallo and Constellation currently expect to complete the transaction prior to March 1.

“We see a tremendous opportunity with this acquisition to bring new consumers into the wine category and look forward to integrating these brands into our portfolio and welcoming the new employees to our family winery,” added Gallo CEO Joseph Gallo.

Beyond the above, other brands included in Gallo’s acquisition include Clos du Bois, Black Box, Estancia, Mark West, Wild Horse, and Franciscan. The wineries included are Mission Bell, Turner Road Vintners, Clos du Bois, and Wild Horse in California, Hogue Cellars in Washington, and Canandaigua in New York.—Daniel Marsteller

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