Friday, June 6, 2008

The Largest Wine Company In The World, Has News!

The largest wine company in the world is close to selling three of the four Sonoma County wineries it acquired in December when it gobbled up Beam Wine Estates for $885 million.

Constellation Brands is negotiating to sell Geyser Peak Winery in Geyserville, Gary Farrell in Healdsburg and Buena Vista Carneros in the Sonoma Valley to a group that includes at least one former Beam Wine executive.

Negotiations have been ongoing for several weeks and the deal could close any day, according to sources familiar with the transaction.

Constellation Brands spokesman Mike Martin declined to comment.

Rumors of a big wine deal have been swirling for weeks.

Industry insiders say the Fairport, N.Y.-based wine giant signaled its willingness to part with the three properties when it reorganized its U.S. wine business in January.

Constellation moved management of Clos Du Bois, the largest winery in the Beam Wine Estates portfolio, to its San Francisco-based Vintas wine division. Management of the Wild Horse Winery in Paso Robles, meanwhile, was shifted to the Icon Estates division in St. Helena.

But the remaining three Sonoma County wineries were kept together as a separate division within Vintas, a sign to some that they weren't central to Constellation's plans.

Details of the sale and the group acquiring the wineries remained hazy Thursday.

The final deal could include more than the three Sonoma County wineries. Several other smaller brands or wineries in Napa and the Pacific Northwest have been mentioned as possible parts of the package, sources said.

A key player in the deal is reportedly Jim DeBonis, former head of production at Simi Winery in Healdsburg and most recently chief operating officer at Beam Wine Estates. He could not be reached for comment Thursday.

If past purchase prices of the various wineries are any indication, the total value of the deal could exceed $200 million.

The Trione family of Santa Rosa sold Geyser Peak to the consumer goods conglomerate Fortune Brands in 1998 for $101 million.

Buena Vista, the oldest winery in California, was sold by its German owners in 2001 to British beverage giant Allied Domecq for $86 million.

And Allied Domecq acquired Gary Farrell Vineyards and Winery in 2004 for an estimated $16 million.

One year later, Allied sold its entire U.S. wine operation to Fortune Brands, which rolled the wineries up together with its own group to become Beam Wine Estates.

Fortune, in an effort to raise cash to bid on Absolut vodka, then sold the Healdsburg-based business to Constellation in December for $885 million, making it one of the largest deals in U.S. wine industry history.

At the time, analysts said Constellation Brands saw Clos Du Bois as the jewel in the Beam Wine crown. The company considers the 1.6 million-case winery key to helping it compete in the mid-price chardonnay market with Kendall-Jackson.

Some analysts also said they wouldn't be surprised to see Constellation shed wineries like Buena Vista Carneros because of its large vineyard holdings. The historic winery owns 800 acres of prime vineyards in the Carneros growing region in southern Sonoma and Napa counties.

After Constellation bought Robert Mondavi Corp. in 2004, it sold many smaller brands and vineyard tracts, including the 588-acre Huichica Hills property, also located in Carneros.

How the values of the wineries today will stack up against the prior sales prices will be closely watched by a local industry that continues to see strong demand as more Americans explore higher-end wines.

But comparisons may be difficult to make since the three wineries have changed substantially in recent years.

Buena Vista's production has been slashed by 80 percent as the winery abandoned its inexpensive line of wines and focused on high-end pinot noir and chardonnay.

Geyser Peak, which underwent a remarkable turnaround in the 1990s, no longer has Australian-born winemaker Darryl Groom at the helm.

And Gary Farrell winery doesn't come with Gary Farrell, the winemaker who helped put the Russian River appellation on the map for high-end pinot noir.