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Constellation seeks new buyer for Paul Masson brandy
US firm Constellation Brands will no longer sell Paul Masson brandy to E&J Gallo Winery as part of a deal to offload 30 drinks brands after “competitive concerns” from a government agency.
Constellation Brands is “pursuing other opportunities” to sell Paul Masson brandy
The US$1.7 billion agreement, which was first announced in April 2019, included brands “principally priced” at US$11 RRP or below and mostly relates to Constellation’s wine portfolio. The sale also included Black Box vodka and Paul Masson brandy.
However, government body the Federal Trade Commission (FTC) has raised concerns regarding the agreement in relation to the brandy, sparkling wine, dessert wine and concentrate categories.
The revised deal will see Paul Masson brandy, Cook’s California Champagne and J Roget American Champagne excluded from the sale. This results in an altered transaction price of around US$1.1bn, of which US$250 million is “an earn-out if brand performance provisions are met over a two-year period after closing”.
Combined, these excluded brands sell about five million cases annually. Paul Masson is one of the world’s largest brandy brands, selling two million cases.
Constellation is “pursuing other opportunities to divest the brands and concentrate business” to firms “whose business strategies better align with the brands”.
“We remain confident in our wine and spirits transformation strategy and we are committed to continuing to work with Gallo and the FTC to finalise this transaction,” said Bill Newlands, Constellation Brands president and chief executive officer.
“We continue to focus our total portfolio to align with consumer-led premiumisation trends and growing segments of the market. We believe pursuing a revised agreement is in the best interest of the brands, our collective employees, business partners and consumers.
“We aim to close as soon as possible and look forward to a seamless transition while continuing to drive momentum in our respective businesses.”
The revised transaction and sale of the excluded brands are expected to close by the end of fiscal 2020, subject to FTC review and approval.
In addition, Constellation Brands has agreed to sell its New Zealand-based wine brand Nobilo and related assets to E&J Gallo for US$130m.