Constellation Brands Inc., Victor, N.Y., announced that it and E. & J. Gallo Winery, Modesto, Calif., have agreed to revise their original transaction to divest a portion of Constellation’s wine and spirits portfolio principally priced at $11 retail and below, including related facilities located in California, New York and Washington. The new agreement will supersede the original agreement announced in April 2019. The revisions to the transaction are to address competitive concerns raised by the FTC primarily related to the sparkling wine, brandy, dessert wine and concentrate categories.

As a result, the brands Cook’s California Champagne, J. Roget American Champagne and Paul Masson Grande Amber Brandy will be excluded from the transaction resulting in an adjusted transaction price of approximately $1.1 billion, of which $250 million is an earnout if brand performance provisions are met over a two-year period after closing, the companies say. Combined, Cook’s, J. Roget and Paul Masson Grande Amber Brandy sell approximately 5 million cases annually. As part of the ongoing transformation strategy for the wine and spirits business, Constellation is pursuing other opportunities to divest the brands and concentrate business excluded from the original agreement to companies whose business strategies better align with the brands. The revised transaction and the divestment of the excluded brands are expected to close by the end of fiscal 2020 and are subject to FTC review and approval.

In a separate transaction, Constellation has entered into an agreement with E. & J. Gallo to divest the New Zealand-based Nobilo Wine brand and related assets for $130 million. This transaction is expected to close in the first half of fiscal 2021 and is subject to FTC and New Zealand regulatory review and approval.

“We remain confident in our wine and spirits transformation strategy and we are committed to continuing to work with Gallo and the FTC to finalize this transaction,” said Bill Newlands, Constellation Brands president and chief executive officer, in a statement. “We continue to focus our total portfolio to align with consumer-led premiumization trends and growing segments of the market. We believe pursuing a revised agreement is in the best interest of the brands, our collective employees, business partners and consumers. We aim to close as soon as possible and look forward to a seamless transition while continuing to drive momentum in our respective businesses.” BI