Blog: Chris Brook-CarterGolden State opportunity

Chris Brook-Carter | 26 October 2004

With the recent California wine tastings in London and the fast approaching month-long tour by our own deputy editor, Olly Wehring, of California’s wine industry, the Golden State has been at the forefront of the just-drinks’ thought process of late.

However, even we were taken a little by surprise by the US$1.3 bln bid (including debt) for the Robert Mondavi wine business by Constellation Brands. Initial reactions from industry analysts suggested this was an offer right out the top drawer.

It more than matches the top-end of predictions for the value Mondavi hopes it will derive from its divestment and restructuring programme. Furthermore Constellation wants to buy Mondavi in its entirety, an offer that promises to keep together one of the most famous names in world wine.

But as each day passes without a positive word from Mondavi’s board, you have to wonder whether it will be enough. Some feel Mondavi is now seeking a means to extract further value from its own restructuring plans. The result would be either to fend off Constellation’s bid or force the group to offer more, which it may well do.

However, it could be taking the time to flush out other offers too. Mondavi is one of the biggest brands in the wine world and it is hard to see it fall to Constellation without at least a skirmish from other parties - but it is harder still to identify where a serious rival might come from.

An acquisition of this size is outside Gallo’s modus operandi and the family-run giant may struggle with competition issues too. Allied Domecq has almost ruled itself out. Mondavi "is not something high on our radar," the Bristol-based drinks group was quoted saying this week. Kendall Jackson’s name has been mentioned, but it is hard to see how it would outbid the publicly-listed Constellation and what interest it would have in Mondavi’s lower end operations at Woodbridge.

In my mind that leaves one serious contender, French giant Pernod Ricard. The owner of Orlando Wyndam is in a strong position, with the weakness of the dollar and the strength of its own stock price. It would be comfortable with the broad range of brands Mondavi has on offer and is keen to expand its North American presence. It’s just a thought, but could this explain Pernod’s abrupt withdrawal from the Glenmorangie bidding process?


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