Dive Brief:
- Private equity firm Butterfly announced it will purchase the Duckhorn Portfolio of luxury wines for $1.95 billion in an all-cash transaction.
- Duckhorn — which is based in Napa Valley, California, and operates 11 wineries across the West Coast — will continue to operate under its name, and will become a privately held company after the transaction, it said in the press release. Duckhorn currently trades on the New York Stock Exchange as NAPA.
- Butterfly Equity has amassed a variety of food and beverage acquisitions since it debuted in 2016, including Milk Specialties Global, Bolthouse Fresh Foods, Orgain and Qdoba restaurants.
Dive Insight:
The massive transaction comes as part of a larger consolidation in the wine industry, as the category sees sales declining amid changing drinking trends among younger consumers.
Deirdre Mahlan, Duckhorn’s president and CEO, said in a statement Butterfly’s purchase of the company will help it enter its next growth phase.
“Butterfly brings a proven track record of strengthening its portfolio companies while helping them advance their long-term strategic objectives,” Mahlan said. “Through our partnership with Butterfly, we expect The Duckhorn Portfolio will have enhanced resources to build on our strong foundation and to further scale our operations.”
Mahlan said the company’s shareholders will receive a “substantial premium” of $11.10 per share in cash.
Some of Duckhorn’s largest wine brands include Duckhorn Vineyards, Decoy and Kosta Browne. Last fall, the Duckhorn Portfolio purchased California chardonnay maker Sonoma-Cutrer Vineyards for $400 million from spirits giant Brown-Forman.
Butterfly said it believes the transaction will enhance Duckhorn’s position as one of the leading luxury wine producers in North America.
“We believe the Company’s curated suite of luxury wine brands, structurally advantaged business model, and world-class team have laid the foundation for a powerful, scalable platform, which will continue to drive growth both organically and through strategic acquisitions,” said Butterfly partner Vishal Patel in a statement.
2024 has presented challenges for winemakers, as many consumers pare back their purchases and moderate their drinking. Wine consumption dropped 2.6% to its lowest level since 1996 last year, according to the annual report from the International Organization of Vine and Wine (OIV) released in April.
In Duckhorn’s earnings call in June, CEO Mahlan told investors difficult market conditions in the wine industry impacted its performance in the first half of the year. But she said premiumization is still a driving force in the category, as the company’s wines in the $15-$25 price range are outperforming less expensive brands which sell for under $15 per bottle.
Critics of Butterfly’s proposed purchase voiced concerns about the deal following its announcement. Wohl & Fruchter LLP, a law firm focused on allegations of corporate fraud, said Monday it is investigating whether Duckhorn’s board of directors had the best interests of the company’s shareholders in mind when pursuing the nearly $2 billion purchase.
“This includes whether the price agreed upon is fair to Duckhorn shareholders, as well as whether all material information regarding the transaction has been fully disclosed,” said Joshua Fruchter, a partner at the law firm, in a statement.
