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Rothschilds take wineries on west coast { May 18 2004 }

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May 18, 2004
Owner of Château Lafite Proposes a Deal That Would Give It a Napa Valley Presence

In a move that could make the owners of Château Lafite-Rothschild significant players in the California wine business, their group, Domaines des Barons de Rothschild, proposed yesterday to join with two partners to buy the 54 percent of the Chalone Wine Group in California that it does not already own for about $60 million.
If the buyout goes through, Rothschild would develop its first estate in Napa Valley, joining other prominent Bordeaux winemakers there like Château Mouton-Rothschild, which shares ownership of Opus One with the Mondavi family, and Château Pétrus, whose owner, Christian Moueix, controls the winery known as Dominus.

The offer would combine the prestige of the Lafite name with the marketing power of Constellation Brands Inc., a major United States producer of wines and spirits, including Wild Irish Rose, a wine rarely seen on the same shelf as first-growth Bordeaux.

The deal would also bring into the fold the expertise of the second partner, the Huneeus family, which owns the Quintessa Estate, an ultra-premium winery in the Napa Valley. Agustin Huneeus, whose father founded Quintessa, has long been considered one of the more brilliant thinkers and planners in the luxury wine business.

The partner who might benefit the most is Constellation because almost all the labels owned by Chalone would fit well in its portfolio, with the Chalone label itself as prestigious as that of any winery in California. Chalone has long been a tempting acquisition target, but its relationship with the Rothschilds was thought to safeguard it from predators.

The buyout group offered $9.25 in cash for each share of Chalone, an 8 percent premium to the closing price of $8.58 on Friday. Shares of Chalone rose $1.09 yesterday, or nearly 13 percent, to $9.67.

Reached at his office in Napa, Tom Selfridge, the president of Chalone, said he had learned of the Rothschild offer and the proposed partnership over the weekend and knew little beyond that. Moreover, he said, he was constrained from commenting on the proposal because he is a member of the Chalone board.

''I talked to all our people this morning,'' he said. ''I told them that it was only an offer and that nothing would change for the present. A special committee of the board has to study the offer. Then, if the committee approves the offer, the shareholders will vote on it. Meanwhile, I really can't say anything.''

If the buyout is completed, the owners would form a privately held company that Barons de Rothschild would use to develop a Napa estate. The company would consist of most of the premium brands of Chalone, the Quintessa winery and the Oakville vineyard of Franciscan Estates, which is owned by Constellation.

''We are changing the way business has traditionally been done in the luxury segment,'' Richard Sands, the chairman and chief executive of Constellation Brands, said in a statement, ''from primarily an individual company basis to a collective partnership of some of the most respected members in the industry.''

Baron Eric de Rothschild, managing director of Barons de Rothschild and the director of Château Lafite-Rothschild, said in the statement: ''We have been active participants over the past 15 years in Chalone's growth. We feel that this proposed transaction establishes a stronger more influential independent company.''

The new venture would probably be headed by Mr. Huneeus, who headed Franciscan Estates until he left several months ago. His father had been president of Franciscan before Constellation bought it several years ago.

The deal requires final agreements among the partners and approval of a committee of the Chalone board. The deal would then be put to Chalone's shareholders, subject to the filing of a proxy statement.

Grapes were first planted on the Chalone estate, high in the Gavilan Mountains in Monterey County, in 1919. It went through several owners and years of neglect before being bought by the Graff family in the 1960's. Richard Graff produced his first wine vintage there in 1966.

Over the years, the group acquired wineries and vineyards throughout California and Washington State. They include Jade Mountain and the Hewitt Vineyard in the Napa Valley, Acacia Vineyard in the Carneros region of Napa, Moon Mountain Vineyard in Sonoma County, Echelon Vineyard in San Miguel, and Edna Valley Vineyard in San Luis Obispo, a joint venture with the Paragon Wine Company.

In Washington State, the Chalone group owns Sageland and Canoe Ridge vineyards. Chalone is also a minority owner of Château Duhart-Milon, a property next to Château Lafite-Rothschild in Bordeaux.

Copyright 2004 The New York Times Company

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