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Purchase by SF company valued at $111 million ends bidding war, elevates firm in state


The Wine Group, the third largest wine producer in California, has won the bidding war for Napa bulk wine company Golden State Vintners.

The San Francisco company's offer of $8.25 a share was accepted by Golden State's directors, it was announced by Golden State Vintners on Friday.

The purchase, valued at $111 million, moves The Wine Group up significantly in California wine production, but it is still a distant third behind beverage giants Gallo and Constellation Brands in worldwide production.

It also ends weeks of uncertainty over the fate of Golden State Vintners, which was the subject of a bidding war between The Wine Group and a group headed by the Golden State chief executive.

And it is also one of the largest sales since the Sebastiani family sold its Turner Road Vintners facility in the Central Valley to Constellation Brands two years ago for $295 million.

Golden State Vintners, The Wine Group and The O'Neill Acquisition Group, which was also bidding for Golden State, all refused to comment Friday.

Analyst Jon Fredrikson of Gomberg, Fredrikson & Associates in Woodside said the purchase significantly increases The Wine Groups production capacity.

"This enables The Wine Group to keep on a strong upward growth path," Fredrikson said. The purchase "gives The Wine Group a much bigger production footprint to enable it to expand over the next five to 10 years."

The agreement also ends a bidding war between The Wine Group and the O'Neill Acquisition Group, headed by Golden State chief executive Jeff O'Neill with support from Constellation Brands, the world's largest spirits company.

Golden State Vintners, headquartered in Napa, produces 12.5 million cases of wine a year, most of that bulk wine on contract and for other wineries. Its wines include the low-cost Golden State brand, and it produces private labels for such grocery outlets as Safeway.

It has wineries in American Canyon, Monterey, Reedley, Fresno and Cutler and about 4,200 acres of vineyards, primarily in the San Joaquin Valley.

The Wine Group is already a major player in the California market, producing 25 million cases, or nearly 12 percent of the wine market. It's major facility is in Ripon.

Among its brands is Franzia, which by volume is the largest single brand sold in the U.S., according to Fredrikson.

The Wine Group also produces Concannon, Glen Ellen, Corbett Canyon, Foxhorn, Mogen David, Casarsa, Austin Vale, Morassutti and Tribuno.

The privately held company's offer is $82 million in cash and the assumption of $29 million in Golden State Vintners debt. When the sale is completed, Golden State will be merged with The Wine Group.

SBIC Partners, which controls 62 percent of the Golden State stock, has entered into an agreement with The Wine Group to consent to the merger at a meeting on Wednesday.

Golden State Vintners' stocked closed Friday at $8.19, down 26 cents.

Neither The Wine Group, Golden State nor the O'Neill group would comment.

O'Neill first proposed that Golden State be taken private last fall and, in early March, headed a group which proposed to buy the company for $6.85 a share.

O'Neill traded bids with The Wine Group several times before The Wine Group made its last offer of $8.25 on Tuesday. The O'Neill group did not make another bid by the Thursday deadline.

O'Neill had some support from Constellation, which produces 29 million cases of wine in California but, with its global operations, is the world's biggest producer of spirits, beer and wine.

Gallo produces 40 million cases in California, but has another 30 million cases worldwide, Fredrikson said.