Duckhorn Portfolio acquired to acquire Sonoma-Cutrer Vineyards from Brown-Forman Corp. for about $400 million to be paid in a combination of Dockhorn stock and cash.

This acquisition will enhance Duckhorn Portfolio as a leading luxury ($15+ per bottle) wine company in the U.S., while rounding out its portfolio by significantly elevating the Company's position within Chardonnay, the No. 1`domestic white varietal, in which The Duckhorn Portfolio lacks a meaningful presence today. Sonoma-Cutrer's track record of strong growth and reputation for delivering renowned wines is an excellent fit with The Duckhorn Portfolio's own uncompromising focus on excellence in winemaking.

For the 12 months ended July 31 (unaudited), Sonoma-Cutrer had net sales of about $84 million. Management estimates that Sonoma-Cutrer's adjusted EBITDA margin profile will be similar to the Company. In addition, management estimates annual run-rate synergies of approximately $5 million, which are expected to be realized in full starting fiscal year 2025 and expects that the transaction will be accretive to Adjusted Earnings per Share in the first full fiscal year following the closing of the deal.

Sonoma-Cutrer Vineyards was founded in 1973 and released its first wine in 1981. It has grown to be one of California's best-known luxury Chardonnay brands, famous for its refined style and commitment to merging traditional and innovative winemaking techniques. Their highly acclaimed Chardonnay primarily sells at retail price points ranging from $20 to $50 per bottle. Sonoma-Cutrer owns six estate vineyards spanning 1,121 acres in both the Russian River Valley and Sonoma Coast appellations. It sells its luxury wine across the U.S. in the wholesale channel through distributors and in the Direct-to-Consumer channel.

Brown-Forman acquired Sonoma-Cutrer in 1999 and for nearly 25 years has supported the growth and development of the brand. Sonoma-Cutrer is now one of the largest luxury Chardonnay brands in the U.S. by retail sales and among the fastest growing major brands in the category.

"We are delighted to welcome Sonoma-Cutrer Vineyards into The Duckhorn Portfolio," said Deirdre Mahlan, the Company's Interim President, Chief Executive Officer and Chairperson. "Sonoma-Cutrer is an iconic, highly acclaimed winery brand with a long history of crafting exceptional wines in a timeless style and is a perfect addition to our thoughtfully curated portfolio of luxury wines. Sonoma-Cutrer is among the fastest-growing major brands in the luxury Chardonnay category. We see opportunity to further accelerate that growth and enhance operating margins of the combined business. This transaction expands our presence and visibility, diversifies our portfolio of luxury American winery brands, and dramatically increases our position in the luxury Chardonnay category."

Lawson Whiting, President and CEO of Brown-Forman added, "We believe The Duckhorn Portfolio provides the capabilities, expertise, and focus to take the Sonoma-Cutrer wines to the next level. The Duckhorn Portfolio has some of the world's most-respected luxury wine brands and Brown-Forman looks forward to participating in their future growth through a minority equity stake and board membership."

Under the terms of the agreement, Brown-Forman will receive 31.5 million shares of Sonoma-Cutrer's common stock, valued at about $350 million based on a 60-day volume-weighted average price as of November 1, 2023, which represents an ownership percentage of approximately 21.5% of the Company post-closing. Brown-Forman will also receive cash consideration of approximately $50 million, subject to certain adjustments.

Duckhorn will finance the cash portion of the purchase price plus transaction related expenses under Duckhorn's existing revolving credit facility. Net leverage is expected to remain unchanged.