The Duckhorn Portfolio, Inc. (NYSE: NAPA) (the “Company”)
announced today that it has entered into a definitive agreement to
acquire Sonoma-Cutrer Vineyards (“Sonoma-Cutrer”), one of the
largest luxury Chardonnay wineries in the U.S., from Brown-Forman
Corporation (“Brown-Forman”), for approximately $400 million to be
paid in a combination of Company stock and cash.
Sonoma-Cutrer Vineyards was founded in 1973 and released its
first wine in 1981. It has grown to be one of California's
best-known luxury Chardonnay brands, famous for its refined style
and commitment to merging traditional and innovative winemaking
techniques. Their highly acclaimed Chardonnay primarily sells at
retail price points ranging from $20 to $50 per bottle.
Sonoma-Cutrer owns six estate vineyards spanning 1,121 acres in
both the Russian River Valley and Sonoma Coast appellations. It
sells its luxury wine across the U.S. in the wholesale channel
through distributors and in the Direct-to-Consumer channel.
Brown-Forman acquired Sonoma-Cutrer in 1999 and for nearly 25
years has supported the growth and development of the brand.
Sonoma-Cutrer is now one of the largest luxury Chardonnay brands in
the U.S. by retail sales and among the fastest growing major brands
in the category.1
This acquisition will enhance The Duckhorn Portfolio as a
leading luxury ($15+ per bottle) wine company in the U.S.,2 while
rounding out its portfolio by significantly elevating the Company’s
position within Chardonnay, the number one domestic white varietal,
in which The Duckhorn Portfolio lacks a meaningful presence today.
Sonoma-Cutrer’s track record of strong growth and reputation for
delivering renowned wines is an excellent fit with The Duckhorn
Portfolio’s own uncompromising focus on excellence in
winemaking.
For the twelve-month period ended July 31, 2023 (unaudited),
Sonoma-Cutrer had approximately $84 million of Net Sales.
Management estimates that Sonoma-Cutrer’s adjusted EBITDA margin
profile will be similar to the Company.3 In addition, management
estimates annual run-rate synergies of approximately $5 million,
which are expected to be realized in full starting fiscal year 2025
and expects that the transaction will be accretive to Adjusted
Earnings per Share in the first full fiscal year following the
closing of the deal.
“We are delighted to welcome Sonoma-Cutrer Vineyards into The
Duckhorn Portfolio,” said Deirdre Mahlan, the Company’s Interim
President, Chief Executive Officer and Chairperson. “Sonoma-Cutrer
is an iconic, highly acclaimed winery brand with a long history of
crafting exceptional wines in a timeless style and is a perfect
addition to our thoughtfully curated portfolio of luxury wines.
Sonoma-Cutrer is among the fastest-growing major brands in the
luxury Chardonnay category. We see opportunity to further
accelerate that growth and enhance operating margins of the
combined business. This transaction expands our presence and
visibility, diversifies our portfolio of luxury American winery
brands, and dramatically increases our position in the luxury
Chardonnay category.”
Lawson Whiting, President and CEO of Brown-Forman added, “We
believe The Duckhorn Portfolio provides the capabilities,
expertise, and focus to take the Sonoma-Cutrer wines to the next
level. The Duckhorn Portfolio has some of the world’s
most-respected luxury wine brands and Brown-Forman looks forward to
participating in their future growth through a minority equity
stake and board membership.”
Under the terms of the agreement, Brown-Forman will receive 31.5
million shares of the Company’s common stock, valued at
approximately $350 million based on a 60-day volume-weighted
average price as of November 1, 2023, which represents an ownership
percentage of approximately 21.5% of the Company post-closing.
Brown-Forman will also receive cash consideration of approximately
$50 million, subject to certain adjustments.
The cash portion of the purchase price, plus transaction-related
expenses, will be financed by borrowings under the Company’s
existing revolving credit facility. As of closing, net leverage is
expected to remain unchanged, excluding synergies.
Pursuant to the agreement, Brown-Forman will be entitled to
nominate two directors to The Duckhorn Portfolio’s Board of
Directors.
The transaction is anticipated to be completed in the third
quarter of the Company’s fiscal year 2024, subject to regulatory
approvals and customary closing conditions.
Nomura Securities International, Inc. is acting as the Company’s
financial advisor and Ropes & Gray LLP is acting as the
Company’s legal advisor. Brown-Forman’s financial advisor is
Greenhill & Co., LLC and its legal advisor is Gibson, Dunn
& Crutcher LLP.
Conference Call Details
The Company will host a conference call and webcast today with
an accompanying presentation to discuss this announcement at 2:00
p.m. Pacific Time (5:00 p.m. Eastern Time). Investors interested in
participating in the live call can dial 833-470-1428 from the U.S.
and 404-975-4839 internationally, and enter confirmation code
961336. A telephone replay will be available approximately two
hours after the call concludes through Wednesday, November 30, 2023
by dialing 866-813-9403 from the U.S., or 929-458-6194 from
international locations, and entering confirmation code 754516.
There will also be a simultaneous, live webcast available on the
Company’s investor relations website at
http://ir.duckhorn.com/events-and-presentations. The webcast will
be archived for 30 days.
Presentation slides have also been posted to The Duckhorn
Portfolio’s investor relations website ir.duckhorn.com.
About The Duckhorn Portfolio
The Duckhorn Portfolio is North America’s premier luxury wine
company, with ten wineries, nine state-of-the-art winemaking
facilities, seven tasting rooms and over 1,100 coveted acres of
vineyards spanning 32 Estate properties. Established in 1976, when
vintners Dan and Margaret Duckhorn founded Napa Valley’s Duckhorn
Vineyards, today, our portfolio features some of North America’s
most revered wineries, including Duckhorn Vineyards, Decoy,
Paraduxx, Goldeneye, Migration, Canvasback, Calera, Kosta Browne,
Greenwing and Postmark. Sourcing grapes from our own Estate
vineyards and fine growers in Napa Valley, Sonoma County, Anderson
Valley, California’s North and Central coasts, Oregon and
Washington State, we offer a curated and comprehensive portfolio of
acclaimed luxury wines with price points ranging from $20 to $230
across more than 15 varietals and 39 appellations. Our wines are
available throughout the United States, on five continents, and in
more than 50 countries around the world.
About Sonoma-Cutrer Vineyards
Sonoma-Cutrer has been crafting wines since 1981 in the esteemed
Russian River Valley growing region of Sonoma County, California.
Our flagship wine, Russian River Ranches, was built on-premises and
for over 30 years has dominated the Most Popular Chardonnay Wine
& Spirits Annual Restaurant Poll. Our winemaking process, led
by a female-driven team, is designed specifically to preserve the
highest quality grapes, and the wines are aged in barrels made of
specific French oak trees that are selected to fit the winemakers’
needs. Sonoma County is the first wine region in the world to be
99% sustainable. As a leader in this initiative, Sonoma-Cutrer
prioritizes protecting the environment in all viticultural and
winemaking processes. All Sonoma-Cutrer wines can be purchased at
the Sonoma-Cutrer winery, as well as, through the wine club, Club
Cutrer.
About Brown-Forman Corporation
For more than 150 years, Brown-Forman Corporation has enriched
the experience of life by responsibly building fine quality
beverage alcohol brands, including Jack Daniel's Tennessee Whiskey,
Jack Daniel's Ready-to-Drinks, Jack Daniel's Tennessee Honey, Jack
Daniel's Tennessee Fire, Jack Daniel's Tennessee Apple, Gentleman
Jack, Jack Daniel's Single Barrel, Woodford Reserve, Old Forester,
Coopers’ Craft, The GlenDronach, Benriach, Glenglassaugh, Slane,
Herradura, el Jimador, New Mix, Korbel, Sonoma-Cutrer, Chambord,
Fords Gin, Gin Mare, and Diplomático Rum. Brown-Forman’s brands are
supported by approximately 5,600 employees globally and sold in
more than 170 countries worldwide.
Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. In some situations, you can identify forward-looking
statements by words such as “approximately,” “anticipate,”
“assume,” “believe,” “contemplate,” “continue,” “could,”
“estimate,” “expect,” “future,” “intend,” “may,” “plan,”
“potential,” “predict,” “project,” “seek,” “should,” “target,”
“will” and similar terms and phrases to identify forward-looking
statements. These forward-looking statements include, among others,
statements about the potential market opportunity resulting from
the acquisition of the Sonoma-Cutrer and associated business
strategy, the Company’s ability to better address certain markets,
expand its capabilities and position in the industry and extend its
product offerings to better serve our customers, as well as the
potential financial benefits derived by and financial impact to the
Company from the acquisition. All of our forward-looking statements
are subject to risks and uncertainties that may cause actual
results to differ materially from those that we are expecting,
including: risks associated with transactions generally; the
failure to consummate or delay in consummating the transaction for
other reasons; the risk that a condition to closing of the
transaction may not be satisfied; the occurrence of any event,
change or other circumstances that could give rise to the
termination of the merger agreement; the outcome of any legal
proceedings that may be instituted following announcement of the
transaction; failure to retain key management and employees of
Sonoma-Cutrer; issues or delays in the successful integration of
Sonoma-Cutrer’s operations with those of the Company, including
incurring or experiencing unanticipated costs and/or delays or
difficulties; unfavorable reaction to the transaction by customers,
competitors, suppliers and employees; unpredictability and severity
of catastrophic events, including but not limited to acts of
terrorism, war or hostilities, as well as management’s response to
any of the aforementioned factors; and additional factors discussed
in the Company’s filings with the SEC.
The forward-looking statements contained in this press release
are based on management’s current plans, estimates and expectations
in light of information currently available to the Company and are
subject to uncertainty and changes in circumstances. There can be
no assurance that future developments affecting the Company will be
those that the Company has anticipated. Actual results may differ
materially from these expectations due to changes in global,
regional or local political, economic, business, competitive,
market, regulatory and other factors, many of which are beyond our
control, as well as the other factors described in Item 1A, “Risk
Factors” in the Company’s 2023 10-K filed with the SEC on September
27, 2023 and other documents the Company may file with the SEC from
time to time. Should one or more of these risks or uncertainties
materialize or should any of our assumptions prove to be incorrect,
our actual results may vary in material respects from what we may
have expressed or implied by these forward-looking statements. Any
forward-looking statement made by the Company speaks only as of the
date on which it is made. All future written and oral
forward-looking statements attributable to the Company or persons
acting on the Company’s behalf are expressly qualified in their
entirety by the previous statements. The Company undertakes no
obligation to publicly update any forward-looking statement,
whether as a result of new information, future developments or
otherwise, except as may be required by applicable securities
laws.
______________________ 1 Circana(IRI) Total US Food data for the
52-week period ended October 29, 2023. 2 Circana(IRI) Total US Food
data for the 52-week period ended October 29, 2023. 3 Excluding
expected run-rate synergies.
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version on businesswire.com: https://www.businesswire.com/news/home/20231116430411/en/
Investor Contact Ben Avenia-Tapper ir@duckhorn.com (707)
339-9232
Media Contact Jessica Liddell, ICR DuckhornPR@icrinc.com
203-682-8200
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