Duckhorn to buy Sonoma-Cutrer Vineyards for $400 million

By Joy Wiltermuth

Sonoma-Cutrer is one of the largest U.S. luxury chardonnay producers

Duckhorn Portfolio, a public Napa Valley wine company known for putting California merlot on the map, has struck a deal to buy chardonnay producer Sonoma-Cutrer Vineyards for about $400 million.

The stock and cash deal will expand Duckhorn's (NAPA) potential sales capability, while boosting its profile within chardonnay. Sonoma-Cutrer's six Russian River Valley and Sonoma Coast estate vineyards will be folded into Duckhorn's umbrella of luxury wines, priced above $15 a bottle.

Brown-Forman, which bought Sonoma-Cutrer in 1999, is set to receive 31.5 million shares of company stock, valued at roughly $350 million, under the deal. It also will get a 21.5% estimated ownership stake, plus about $50 million in cash. The cash portion would be financed using Duckhorn's revolving credit facility.

"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," said Lawson Whiting, president and CEO of Brown-Forman, in a statement.

Shares of Duckhorn slipped Thursday, and are down about 35% year to date. In a rare move for a U.S. winery, Duckhorn went public in 2021.

Acquisitions have been a key part of Duckhorn's strategy to expand its footprint of U.S. luxury wines on the West Coast, as well as fortifying its wine production capabilities against wildfires and climate change.

See: Duckhorn CEO on how the pure-play, exchange-listed wine maker will grow, and adapt to climate change

Duckhorn Portfolios, which includes Decoy, Paraduxx, Canvasback and other duck-themed labels, already includes 10 wineries stretching from Washington state's Walla Walla region to California's Central Coast.

Duckhorn reported $100 million in net sales during a fiscal-year 2023 earnings call in September, up 28.3% from a year before. Sonoma-Cutrer said it had about $84 million of annual net sales as of July 31. The deal is anticipated to close in the third quarter of Duckhorn's fiscal year 2024.

-Joy Wiltermuth

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11-16-23 1811ET

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