Constellation Brands and Gallo’s $1.7bn deal delayed

The US$1.7 billion deal between Constellation Brands and E&J Gallo is to be delayed after both companies received a request for additional information and documentary material from the US Federal Trade Commission.

On 3 April, Constellation and E&J Gallo entered into an asset purchase agreement over the agreed sale of $1.7 billion worth of wine brands. Constellation intends to offload its wine brands priced at US$11 and below sold, including Clos du Bois, Black Box, Estancia, Mark West, Wild Horse, Franciscan, and Ravenswood, along with six winemaking facilities, to E&J Gallo.

Those wineries include Mission Bell, Turner Road Vintners, Clos du Bois and Wild Horse in California, Hogue Cellars in Washington, and Canandaigua in New York.

On 17 April, the companies filed the relevant forms in connection to the sale and submitted them to the US Department of Justice and the US Federal Trade Commission, according to the Hart-Scott-Rodino Antitrust Improvement Act of 1976.

However, on 17 May, both firms received a request for additional information from the US Federal Trade Commission in connection with a review of the transactions submitted.

Referred to as the ‘second request’, this extends the waiting period 30 days after both companies have complied with the request from the trade commission. As a result, Constellation expects that the deal will no longer be completed in the first quarter of its 2020 fiscal year (the three months to 31 May 2019), but rather the second half of the 2019 calendar year.

Constellation confirmed that it will continue the normal operation of its entire wine and spirits business until the transaction is completed.

Speaking at the time, CEO and president of Constellation Brands, Bill Newlands, said the deal would allow the company to focus on its premium brands which he said are performing better.

“One of the hallmarks of our success over the years has been our ability to evolve and stay on the forefront of emerging consumer trends,” said Newlands.

“This decision will help enhance organizational focus on a more premium set of wine and spirits brands that better position our company to drive accelerated growth and shareholder value. In turn, Gallo is acquiring a collection of great brands that complement their operational model and business strategy to provide quality products to consumers at every price point.”