The proposed merger between Constellation and The Robert Mondavi Corp. has been finalised. The two companies yesterday (3 November) signed a definitive merger agreement in which Constellation will acquire all the outstanding shares of Mondavi at a price of US$56.50 per share in cash for Mondavi's Class A common stock and US$65.82 per share in cash for Mondavi's Class B common stock.

The total value of this transaction is approximately US$1.36 bln, including approximately US$1.03 bln of equity on a fully diluted basis plus the assumption of approximately US$325m of Mondavi net debt.

The combination will keep the Robert Mondavi portfolio intact and expand Constellation's fine wine offerings. It also brings together complementary wine assets, including vineyards, production facilities and distribution capabilities that will strengthen Constellation's portfolio and the Robert Mondavi brand.

"This is history in the making," said Constellation Brands chairman and chief executive officer Richard Sands in a statement. "Constellation and The Robert Mondavi Corporation are two innovative, energetic, and solidly growing companies with a combined total of nearly 100 years of wine making experience. This once-in-a-lifetime combination will preserve and enhance the heritage of both companies by producing outstanding wine for generations to come. I am particularly pleased that Robert G. Mondavi has agreed to remain involved in the business and serve as the brand's ambassador working out of his office in the Robert Mondavi Winery.

"We believe this is a terrific outcome that best serves the interests of Constellation and The Robert Mondavi Corporation employees, customers, shareholders and consumers," Sands added. "We understand and appreciate the long, rich history of the Mondavi family, the Robert Mondavi brand and the contributions of The Robert Mondavi Corporation's dedicated employees. We fully support the fine wine vision of the Robert Mondavi Winery and are committed to further enhancing the prestige of this flagship Winery, as well as giving the Robert Mondavi brand the recognition it deserves throughout the world. We fully expect that as part of the Constellation family the Robert Mondavi name will continue to be associated with the highest in quality and will remain an industry leader," concluded Sands.

"After careful consideration of our strategic alternatives, our board of directors concluded that this transaction with Constellation is in the best interests of The Robert Mondavi Corporation's shareholders, employees and the Robert Mondavi brand," said Ted Hall, chairman of the board for Robert Mondavi.

"The Robert Mondavi Corporation's shareholders are receiving a significant cash premium for their Mondavi investment. This combination will create long-term benefits for the Robert Mondavi brand, as well as for all of the products in the company's portfolio. We look forward to a rapid completion of this transaction and to working with Constellation to ensure the smoothest transition possible."

The transaction will be accretive to Constellation's comparable earnings per share in the first full fiscal year, and it is not conditioned on financing because Constellation has received commitments for the financing necessary to complete the transaction.

The merger agreement, which was approved by the board of directors of both companies, is subject to the approval of the holders of a majority of class A shares (other than holders of class A shares who are also recordholders of class B shares), as well as conditions customary to transactions of this type, including governmental and regulatory approvals. In that regard, holders of a majority of the outstanding class B shares have agreed to vote in favour of the merger. In connection with the transaction, The Robert Mondavi board announced that it will no longer seek shareholder approval for its proposed reincorporation and recapitalisation plan, and intends to postpone its annual meeting of shareholders that had been scheduled for 30 November. The companies expect to complete the transaction by the end of 2004 or early 2005.