Golden State Vintners (GSV) has rejected a US$72m buyout bid from Wine Group in favour of a bid from a group led by chief executive Jeffrey O'Neill for the same amount. The decision has brought a stinging attack from the Wine Group.

Under the terms of the amended and restated merger agreement with O'Neill Acquisition Co., each outstanding share of GSV's Class A and Class B Common Stock (other than shares held by the O'Neill Group) will be entitled to receive merger consideration of US$7.25 per share in cash.

The transaction value is approximately US$100m, consisting of an equity valuation of approximately US$72m and total debt (as of 31 December 2003) of approximately US$29m, which matches the transaction value of an offer previously received by GSV from The Wine Group LLC.

In negotiations earlier this week, O'Neill increased his US$6.85-a-share offer for Golden State to match the US$7.25-a-share bid by San Francisco-based Wine Group. O'Neill will look to borrow around US$36m to complete the transaction.

The Wine Group attacked the decision, however. In a statement, the company's CEO David B Kent said: "We don't understand how a properly functioning board of directors, when presented with our offer, can agree to a transaction that is contingent on the ability of a newly- formed company to raise such a substantial amount of money.

"The Wine Group's offers to acquire GSV have never been conditioned on financing," Kent continued. "We have concluded that under these circumstances it does not make sense for The Wine Group to bid against itself."

The merger is expected to be completed by the end of July 2004.