New Zealand's two largest wine companies are to merge following today's announcement that Montana Wines is to buy Corbans Wines from DB Group for $NZ151m plus $NZ3m of bank debt.

A stronger export drive for the companies was immediately forecast by Montana's MD, Peter Hubscher.

"It gives us the critical mass to compete more effective internationally," Hubscher said.

The combined companies have sales of about $NZ320m, about a third the size of Australia's two major companies, BRL Hardy and Southcorp.
Hubscher said that Montana's international growth, despite having strong brands, had been hampered by a lack of supply.

Corbans, conversely, had relatively weak brands but surplus supplies.
The UK, the US, where marketing was at an "elementary" stage, and Australia, where Corbans already had a small salesforce, would be the main targets.

Increased domestic sales were not expected because the two companies already held 90% of the cask wine market, 60% of the sparkling market and 35% of table wine sales.

The current combined crush of about 40,000 tonnes was about 50% of the New Zealand harvest. New plantings would see the crush total about 50,000 tonnes in a national harvest of 150,000 tonnes.

Hubscher said that amalgamations of the two companies' facilities would result from the merger, their Gisborne wineries being 100m apart and the Hawkes Bay wineries also being situated close to each other. The future of the Marlborough wineries was still being considered.

One analyst said that the purchase price, at about 15 times Corbans' forecast EBIT for 2000-1, was "a good price" for the DB Group.

The sale leaves BRL Hardy-owned Nobilo Wines as New Zealand's second largest producer with about 6% of the total wine market.

BRL Hardy MD, Stephen Millar, said today that he expected Nobilo's market share to increase to about 20% within five to 10 years.

MD of DB Group, Brian Blake, said the sale, expected to be finalised in mid-November, completed the restructuring of the group through the divestment of non-core assets.

"We can now concentrate on being a brewer and marketer of beer," he said.

DB Group, New Zealand's second largest brewer, is a subsidiary of Singapore-based Asia Pacific Breweries, jointly owned by Heineken and diversified group Fraser & Neave.