Private equity firm Sycamore Partners has agreed to buy Ste Michelle Wine Estates for $1.2bn in cash, plus ‘the assumption of certain liabilities’, Altria has announced.
If approved by regulators, it will mark the sale of the one of the largest US wine producers.
Ste Michelle is a major player on the Washington State wine scene, with brands including 14 hands and Chateau Ste Michelle, but also has several partnerships and distribution deals.
In 2007, Ste Michelle and Italy’s Antinori bought Napa Valley’s Stag’s Leap Wine Cellars, a previous winner at the celebrated 1976 Judgement of Paris.
According to Altria’s most recent annual report, Ste Michelle has an 85% stake in Michelle-Antinori LLC, which in turn owns Stag’s Leap Wine Cellars.
Altria said the sale of Ste Michelle Wine Estates was expected to complete in the second half of 2021 and was an important step in creating value for its own shareholders.
The tobacco giant oversaw a ‘strategic reset’ of the Ste Michelle wine business last year.
Surplus wine stocks and lower consumer demand led to Altria reporting a $292m one-time charge in its wine division in the first quarter of 2020, to ‘write off inventory’. It reported a separate $100m charge based on estimated losses linked to ‘future non-cancelable grape purchase commitments’, according to notes in Altria’s financial statements.
The firm also warned of the impact of the Covid-19 pandemic on consumer demand for wines produced and distributed by Ste Michelle.
There have been signs of improvement more recently. Altria reported that its wine arm saw net sales of $150m for the first three months of 2021, up on $146m in the same period of 2020. Pre-tax profits in wine were $18m for the first quarter of 2021.
David Dearie, who became Ste. Michelle’s president and CEO in late 2020, said he was positive about the future following the sale agreement with Sycamore.
‘The Ste. Michelle leadership team and I look forward to working with the team at Sycamore Partners and believe we are well-positioned to drive the next phase of our growth.’
Billy Gifford, Altria’s CEO, said, ‘Ste. Michelle and its talented employees have built an outstanding portfolio of premium wine brands, and we wish them future success.’