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Diving overview:
- Private equity firm Butterfly announced that it will purchase the Duckhorn Portfolio of fine wines for $1.95 billion in an all-cash transaction.
- Duckhorn, which is headquartered in Napa Valley, California and operates 11 wineries across the West Coast, will continue to operate under its own name and will become a privately held company following the transaction, the company said in a news release. Duckhorn currently trades on the New York Stock Exchange under the ticker symbol NAPA.
- Butterfly Equity has amassed a variety of food and beverage acquisitions since its debut in 2016, including Milk Specialties Global, Bolthouse Fresh Foods, Orgain and Qdoba Restaurants.
Dive Insights:
The massive deal comes as part of a larger consolidation in the wine industry. This is because sales in the category are declining due to changing drinking trends among younger consumers.
Deirdre Mahlan, Duckhorn’s president and CEO, said in a statement that Butterfly’s acquisition of the company will help it enter its next phase of growth.
“Butterfly brings a proven track record of strengthening our portfolio companies while helping them achieve their long-term strategic goals,” said Mahlan. “Through our partnership with Butterfly, Duckhorn Portfolio expects to build on a strong foundation and have enhanced resources to further expand our operations.”
Mahlan said the company’s shareholders would receive a “significant premium” of $11.10 per share in cash.
Duckhorn’s largest wine brands include Duckhorn Vineyards, Decoy, and Kosta Browne. last fall, Deokhon Portfolio purchased California Chardonnay Maker. Sonoma-Cutter Liquor giant Brown-Forman’s $400 million vineyard.
Butterfly said it believes the transaction will strengthen Duckhorn’s position as one of North America’s leading fine wine producers.
Butterfly Partners said, “We believe the Company’s curated family of premium wine brands, structurally advantageous business model, and world-class team have laid the foundation for a strong, scalable platform that will continue to grow both organically and through strategic acquisitions. “We will promote it,” he said. Vishal Patel said in a statement.
2024 has presented challenges for winemakers as many consumers cut back on purchases and moderate their drinking. According to the annual report released in April by the International Organization for Vine and Wine (OIV), wine consumption last year decreased by 2.6%, the lowest since 1996.
During Duckhorn’s earnings call in June, CEO Mahlan told investors that difficult market conditions in the wine industry impacted first-half performance. But she said premiumization remains a driving force in the category, as the company’s wines in the $15 to $25 price range outperform lower-priced brands selling for less than $15 a bottle.
Critics of Butterfly’s proposed purchase have expressed concerns about the deal since its announcement. Wohl & Fruchter LLP, a law firm that focuses on allegations of corporate fraud, said Monday it is investigating whether Duckhorn’s board had the best interests of the company’s shareholders in mind when pursuing the nearly $2 billion acquisition.
“This includes whether the agreed price is fair to Duckhorn shareholders and whether all material information regarding the transaction was fully disclosed,” Joshua Fruchter, a partner at the law firm, said in a statement.
