Constellation Revises Gallo $1b Deal Again To Placate F T C

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Constellation Brands said Thursday it has removed yet another alcohol brand from the menu of its partial portfolio sale to E. & J. Gallo Winery to address Federal Trade Commission antitrust concerns, revising a deal that was once valued at $1.7 billion down to just over $1 billion.

Constellation Brands Inc., the company behind Corona and Modelo beer, said its California-based Mission Bell winery is now excluded from the transaction, which saw brands dropped in December as well. The latest cut removes Mission Bell facilities and certain related real estate, equipment, contracts and employees from the deal that was originally announced in April 2019.

"This move puts us one step closer to finalizing this transaction," Constellation President and CEO Bill Newlands said in a release. "We continue to work in collaboration with Gallo to satisfy all FTC obligations, and both companies remain fully committed to closing the transaction. Our wine and spirits transformation strategy continues to gain traction and we look forward to closing this transaction in the coming months."

Constellation had originally planned to sell about 30 wine and spirits brands that retail for $11 or less to Gallo, which claims to be the largest family-owned winery in the world, in a deal initially valued at $1.7 billion. Although Constellation said little Thursday about its dealings with the FTC, the agency issued a so-called second request, disclosed in May 2019, scrutinizing the transaction beyond the material submitted in the original merger notification.

In December, Constellation announced that J. Roget American Champagne, Cook's California Champagne and Paul Masson Grande Amber Brandy were no longer a part of the deal, which is estimated at about $1.1 billion. According to the company, those brands sell roughly 5 million cases a year combined and were dropped "to address competitive concerns raised by the FTC primarily related to the sparkling wine, brandy, dessert wine and concentrate categories."

With Mission Bell now off the table as well, the deal is now valued at $1.03 billion, Constellation said, noting that $250 million of that total is an earnout to be paid two years after closing only if certain brand performance metrics are met.

The deal is subject to review by the FTC and is expected to close in the second quarter of fiscal year 2021.

Constellation said it and E. & J. Gallo have also agreed in a separate transaction for Gallo to pick up Constellation's Nobilo Wine brand out of New Zealand for $130 million.

By Dave Simpson
May 28, 2020
Source: Law360.com