- Wednesday, October 16, 2024
Duckhorn Portfolio, a renowned Napa Valley wine company that is credited with popularizing California merlot, has recently announced its acquisition of Sonoma-Cutrer Vineyards for approximately $400 million. The deal, which involves a combination of stock and cash, not only expands Duckhorn's potential sales capability but also enhances its presence in the chardonnay market.
Sonoma-Cutrer, known for its exceptional chardonnay production, boasts six estate vineyards situated in the Russian River Valley and Sonoma Coast regions. Following the acquisition, these vineyards will be seamlessly integrated into Duckhorn's collection of luxury wines, which are priced above $15 per bottle.
Under the terms of the agreement, Brown-Forman, the current owner of Sonoma-Cutrer since 1999, will receive 31.5 million shares of Duckhorn company stock valued at approximately $350 million. In addition, Brown-Forman will hold an estimated ownership stake of 21.5% and receive around $50 million in cash. The cash component of the deal will be financed using Duckhorn's revolving credit facility.
Lawson Whiting, President and CEO of Brown-Forman, expressed enthusiasm about the collaborative future between the two companies as he affirmed, "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."
Although Duckhorn's stock experienced a decline on Thursday and has dropped approximately 35% year to date, the winery made a noteworthy move by going public in 2021, which is uncommon in the U.S. wine industry.
The acquisition aligns with Duckhorn's strategic approach to expanding its presence in the luxury wine market along the West Coast and fortifying its wine production capabilities to mitigate the effects of wildfires and climate change.
Duckhorn Portfolios, which includes acclaimed labels such as Decoy, Paraduxx, and Canvasback, already encompasses ten wineries spanning from Washington state's Walla Walla region to California's Central Coast.
In terms of financial performance, Duckhorn reported $100 million in net sales during its fiscal-year 2023 earnings call in September, reflecting a robust increase of 28.3% compared to the previous year. Sonoma-Cutrer, on the other hand, reported approximately $84 million in annual net sales as of July 31. The completion of this deal is expected to take place in the third quarter of Duckhorn's fiscal year 2024.
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