Mondavi to Split, Merge or Sell

Robert Mondavi announced Friday that the Mondavi family will be trading their 'B' shares for 1.165 'A' shares, adjusting their ownership (after a $30 million buy-back) to just under 40%.

Reasons given were typical and expected: corporate governance, eliminate disparity in voting rights, etc.

However, bearing in mind that the other announcement Friday dealt with creating two business models, one for the high-end wines (Napa) and one for the low-end wines (Woodbridge), let's do a little math to see what the two announcements are really about:

Current MOND Market Cap $670M x 40% = $265M family equity in stock

Napa vineyards: 1,500 acres valued at appx $130,000 per acre (average)
Total value = $195M

Oakville Winery & Brand: Appx $80 million in revenues, value of 4 times revenues (industry average) for a presumed value of $320M.

Total Value of Napa Assets: Approximately $500M.

By assuming that the purchase is financed through 50% debt and 50% equity (also near the industry standard) this would allow the family to retain the Oakville/Napa flagship brand while allowing the remainder of the company to either remain public, be sold to Diageo, or merged with Southcorp.

The layoffs and fallout will be colossal. Stay tuned. . . .