Fetzer sold to Chilean wine company for $238 million

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[caption id="attachment_28104" align="alignleft" width="225" caption="(courtesy of CF Napa)"][/caption]

HOPLAND -- Brown-Forman Corp. (NYSE: BFA, BFB) today said it has agreed to sell Fetzer Vineyards to Viña Concha y Toro S.A. (NYSE: VCO) for $238 million after reviewing options for Mendocino County-based wine operations.

The sale is expected to close next month. It includes neither the superpremium Sonoma-Cutrer brand nor the Brown-Forman's longstanding sales and marketing agreement with Korbel California Champagnes of Guerneville.

The acquisition includes brands Fetzer, Bonterra, Five Rivers, Jekel, Sanctuary and Little Black Dress, 1,060 acres of 1,060 acres of owned and leased vineyards in Mendocino County, wineries with production capacity of 9.5 million gallons in Hopland and 1.58 million gallons in Paso Robles on the Central Coast of California and a bottling plant. Fetzer employs about 240.

Sales for the Fetzer brands in fiscal 2010 were $156 million for 3.1 million cases. Annual production of the Fetzer brand itself is 2.2 million cases and of the certified-organic Bonterra brand, 300,000 cases.

"The Fetzer acquisition is the largest transaction of this type in the company’s history," said Eduardo Guilisasti, chief executive officer of Concha y Toro. " It represents a continuation of our business strategy, which has been carried out successfully over time and enabled us to enjoy steady growth. We believe that this transaction opens additional growth opportunities globally, as well as in the American market, with its main brands Fetzer and Bonterra. We further intend to incorporate the culture of excellence and commitment of the great team at Fetzer who have created exceptionally strong consumer brands."

Brown-Forman said it considered a range of alternatives, but decided that selling Fetzer was best for shareholders. The company expects to boost fiscal 2011 earnings per share by 20 to 30 cents.

"Brown-Forman and our partners have done a great job with these brands over the years, but as our company has grown globally and our portfolio strategy has evolved, we concluded that our company and our shareholders are best-served by redirecting our resources to those opportunities around the world which offer stronger growth and higher returns on invested capital," said Chief Executive Officer Paul Varga.  "This will also enable us to more fully focus on our best growth prospects in our most important market, the United States."

Santiago-based Concha y Toro started in 1883 and owns 23,475 acres of vineyards and exports to 135 countries. Sales last calendar year were $799.1 million, up 5.5 percent from those for 2009. Volume sales increased 8.3 percent from 2009 to 20.5 million cases.

Concha y Toro's exports of bottled wine in 2010 totaled $592 million, an increase of 3.8 percent from a year before. Exports primarily went to Europe, amounting to 51.5 percent of the company's exports last year, followed by the U.S. at 16.2 percent and South America at 8.3 percent.

The company's portfolio ranges from the higher end with Don Melchor and Almaviva to the company's main brand, Casillero del Diablo, as well as Palo Alto and Maycas del Limarí. The company has 3,162 employees.

Financial advisers for Brown-Forman were Rabo Securities USA Inc. and Rothschild.  Pillsbury Winthrop Shaw Pittman LLP and Stoll Keenon Ogden PLLC  were legal advisers.

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