Professor Bainbridge...on law, politics, religion, culture & food

Mondavi Family Loses Control; Possible Sale

A while back I posted on the problems the Mondavi family was having passing their wine business down from the founding to the second generation. Hence, it comes as no surprise to learn that the family is giving up their controlling stock position and may be preparing the company for a sale or breakup.

Shares of Robert Mondavi Corp. jumped nearly 10 percent Monday on news of a corporate restructuring that would reduce the Mondavi family's control in the company, a move analysts said could be a precursor to a sale of part of the business.

The plan, announced late Friday, would cut the voting power of the Robert Mondavi family to 39.5 percent from 84.9 percent by exchanging the family's super-voting Class A shares for regular Class B shares, eliminating the dual stock structure.

At the same time, the Oakville (Napa County) company plans to split into two divisions, one managing luxury brands like Opus One and Robert Mondavi Winery Napa Valley, and the second for under-$15 "lifestyle" brands such as Woodbridge by Robert Mondavi.

Interestingly, they will also be reincorporating in Delaware (Coors did the same thing last year). The interesting question is what happens next. Will they try to sell the lifestyle brands? If so, however, wouldn't a buyer want rights to use the Mondavi name? But that would only exacerbate the problem of brand confusion between the two lines. At all events, the elimination of the dual class stock structure will make the company even more vulnerable to pressure from institutional investors and potential hostile bidders.