Thursday, May 24, 2007

Duckhorn's Final Bidders Announced?

In his Wine Market Report, Rich Cartiere announced that the final three bidders for Duckhorn are Fortune Brands (Jim Beam, Clos du Bois, Geyser Peak, etc.), Pernod-Ricard (Mumm), and Constellation (everything from Mondavi to Wild Irish Rose).

Now I've theorized on the Duckhorn sale previously but this is a further puzzlement. I just don't see why Constellation would be able or want to buy Duckhorn. They've recently announced a major purchase of Svedka vodka for $384 million, a purchase that Constellation admits will not be accretive to earnings for several years. Constellation is already highly leveraged, its stock price has struggled recently and they already own two major Napa properties (Mondavi and Franciscan). What does Duckhorn give them, particularly if they have to pay top dollar via an auction process? I don't get it.

For Pernod, it might make a little more sense. They are a French company, the dollar is cheap right now and Duckhorn is maybe the top ultra-premium US wine brand. Buying Duckhorn would give them an immediate foothold in California and probably help the sales of their other wines (which other than Mumm Napa are all imports) domestically. Still, the French have made very very few purchases in the California wine business, particularly at top prices. I'm surprised if they are still in there.

For Fortune, who just bought the wine portfolio of Allied-Domecq last year (Pernod got the spirits and non-US wine business), this might make a bit more sense as they have limited sales at the high end (+$20/bottle William Hill, Atlas Peak, Gary Farrell - all small), good business at the middle-end ($14-20/bottle Wild Horse, Buena Vista, some Geyser Peak) and lots of business from $7-14 (Canyon Road, Clos du Bois, Geyser Peak's great Sauv Blanc). This is a portfolio that could really use an "extreme makeover", and Duckhorn could do just that for them.

So, I'll bet a virtual beer than Fortune gets it, takers?


Blogger St. Vini said...

This comment has been removed by the author.

May 29, 2007 1:18 PM  
Blogger St. Vini said...

As a follo up to this, Pernod Ricard is actively pursuing one (or two!) major Vodka brands and are implying that they have limits to their purchasing power. Would they really want to take on more debt to buy Duckhorn as well?

May 29, 2007 1:20 PM  

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