LOS ANGELES & ST. HELENA, Calif. - The Duckhorn Portfolio (NYSE: NAPA), a prominent luxury wine company in North America, has reached a definitive agreement to be acquired by Butterfly Equity, a private equity firm specializing in the food and beverage industry. The all-cash transaction is valued at approximately $1.95 billion.
Stockholders of Duckhorn are set to receive $11.10 per share, marking a 65.3% premium over the company's volume-weighted average share price for the 90-day period ending on October 4, 2024. After the transaction's expected closure this winter, Duckhorn will transition to a privately-held entity.
Duckhorn, founded in 1976, boasts a portfolio of esteemed brands including Duckhorn Vineyards, Decoy, Sonoma-Cutrer, and Kosta Browne. The company's wines are distributed across five continents and over 50 countries. Post-acquisition, Duckhorn will maintain its headquarters in St. Helena, California, and continue operating its eleven winery brands.
Deirdre Mahlan, President, CEO, and Chairperson of Duckhorn, expressed confidence in Butterfly's commitment to fostering the company's growth and innovation. Butterfly Equity, founded in 2016, has a track record of partnering with leading food and beverage companies to enhance their strategic objectives and operations.
Butterfly's Co-Founder and Co-CEO, Adam Waglay, highlighted the opportunity to apply their sector expertise to support Duckhorn's mission. Vishal Patel, a partner at Butterfly, praised Duckhorn's luxury wine portfolio and business model, anticipating continued organic growth and strategic acquisitions.
The transaction is subject to customary closing conditions, including approval by Duckhorn stockholders and regulatory approvals. It does not hinge on financing conditions. Additionally, a 45-day "go-shop" period allows Duckhorn to seek alternative proposals until November 20, 2024.
Duckhorn's common stock will be delisted from the New York Stock Exchange upon completion of the transaction. The company has also announced its fiscal fourth quarter and full year 2024 financial results but has canceled the earnings call that was scheduled for today.
J.P. Morgan Securities LLC and Ropes & Gray LLP are advising Duckhorn, while Butterfly is advised by KKR Capital Markets LLC and Kirkland & Ellis LLP. The Farm Credit System is providing committed debt financing for the transaction.
This news article is based on a press release statement and contains forward-looking statements that involve risks and uncertainties. These statements are not guarantees of future performance, and actual results may differ materially.
In other recent news, The Duckhorn Portfolio, Inc. has seen adjustments to its stock target by two major firms. JPMorgan has reduced its price target for the company from $9.00 to $7.00, maintaining a Neutral rating. This revision comes ahead of the company's anticipated fourth-quarter earnings report, with estimates of $104.3 million in sales and $35.1 million in EBITDA. For fiscal year 2025, JPMorgan has slightly lowered its estimates for The Duckhorn Portfolio, reflecting potential challenges related to pricing and promotional activities, and a deceleration in growth contributions from Sonoma-Cutrer.
Similarly, Barclays has also adjusted its outlook, lowering its price target from $8.00 to $6.00, while maintaining an Equalweight rating. This revision follows The Duckhorn Portfolio's broad forecast for the fourth fiscal quarter, with potential outcomes ranging from a decrease of 7.4% to an increase of 2.5%. Barclays highlighted the importance of inventory alignment, recent consumer trends in the luxury wine market, and the momentum of The Duckhorn Portfolio's offerings moving into fiscal year 2025. The firm slightly tempered the FY25 organic sales forecast for The Duckhorn Portfolio by 50 basis points, reflecting a cautious view of the industry's outlook, despite the company's expected continued market share gains.
InvestingPro Insights
The acquisition of Duckhorn Portfolio by Butterfly Equity at $11.10 per share represents a significant premium over recent trading prices, reflecting the company's strong market position and growth potential in the luxury wine sector. This valuation aligns with several key financial metrics and trends highlighted by InvestingPro.
According to InvestingPro data, Duckhorn's market capitalization stood at $794.08 million prior to the acquisition announcement, indicating that Butterfly Equity's offer of approximately $1.95 billion represents a substantial premium. This premium is further emphasized by the fact that Duckhorn was trading near its 52-week low, with the stock having fallen significantly over the last three and six months.
Despite recent stock price challenges, Duckhorn's fundamentals remain strong. The company boasts impressive gross profit margins of 54.91% for the last twelve months as of Q3 2024, showcasing its ability to maintain pricing power in the competitive wine industry. This aligns with an InvestingPro Tip highlighting Duckhorn's "impressive gross profit margins."
Another InvestingPro Tip notes that Duckhorn's "liquid assets exceed short-term obligations," indicating a solid financial position that likely contributed to its attractiveness as an acquisition target. This financial stability, combined with the company's revenue of $398.18 million over the last twelve months and a moderate revenue growth of 4.53%, suggests a stable platform for Butterfly Equity to build upon.
The acquisition price also reflects a forward-looking perspective on Duckhorn's value. While the company was trading at a P/E ratio of 12.62 (adjusted for the last twelve months), the InvestingPro Fair Value estimate of $8.57 per share and the analyst fair value target of $9.00 suggest that Butterfly Equity sees significant upside potential in Duckhorn's business model and market position.
For investors interested in deeper analysis, InvestingPro offers 8 additional tips for Duckhorn, providing a comprehensive view of the company's financial health and market position.
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