| Item 1.01 | Entry into a Material Definitive Agreement. |
Merger Agreement
On November 16, 2023, The Duckhorn Portfolio, Inc., a Delaware corporation (the “Company”), Auguste Merger Sub, Inc., a California corporation and an indirect wholly-owned subsidiary of the Company (“Merger Sub”), Brown-Forman Corporation, a Delaware corporation (“Brown-Forman”), and Sonoma-Cutrer Vineyards, Inc., a California corporation and a wholly-owned subsidiary of Brown-Forman (“Sonoma-Cutrer”), entered into an Agreement and Plan of Merger, dated November 16, 2023 (the “Merger Agreement”), pursuant to which Merger Sub will merge with and into Sonoma-Cutrer (the “Merger”) with Sonoma-Cutrer continuing as the surviving entity after the Merger. The board of directors of the Company approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.
The aggregate consideration paid in the Merger, to be issued and paid, as applicable, at the effectiveness of the Merger (the “Effective Time”) consists of 31,531,532 shares of the Company’s common stock (the “Share Consideration”) and $50,000,000 payable in cash, subject to adjustments set forth in the Merger Agreement, including for cash, working capital, indebtedness and transaction expenses. The cash consideration is expected to be funded through cash on hand and borrowings under the Company’s revolving credit facility.
Consummation of the Merger is subject to customary closing conditions, including competition clearance, and the required period having elapsed since the mailing to the Company’s stockholders of a definitive information statement with respect to approval by the Company’s stockholders of the transactions contemplated by the Merger Agreement. Following the execution of the Merger Agreement, Mallard Holdco, Inc. (“Mallard”), which holds a majority of the outstanding shares of common stock of the Company, executed and delivered to the Company an irrevocable written consent approving the transactions contemplated by the Merger Agreement (the “Written Consent”). No further approval by holders of shares of the Company’s common stock is required to adopt the Merger Agreement or approve the Merger, the issuance of the Share Consideration, or the other transactions contemplated by the Merger Agreement.
The Merger Agreement contains customary representations, warranties and covenants of the Company, Brown-Forman and Sonoma-Cutrer. From the date of the Merger Agreement until the earlier of the Effective Time or termination of the Merger Agreement in accordance with its terms, the Company and Sonoma-Cutrer are each required to conduct their respective business and operations in all material respects in the ordinary course of business consistent with past practice, subject to certain exceptions. In addition, pursuant to the terms of the Merger Agreement, Brown-Forman has agreed to a standstill provision, pursuant to which, subject to certain exceptions, until Brown-Forman beneficially owns less than 5% of the voting power of the Company’s outstanding securities, it will not acquire shares of the Company’s common stock representing more than 40% of the voting power of the Company’s aggregate outstanding securities, will not make or become a participant in any solicitation of proxies, will not form a “group,” as defined in Rule 13d-5 of the Securities and Exchange Act of 1934, as amended, with respect to the voting of any shares of the Company’s common stock and will not nominate persons for election to the Company’s board of directors other than pursuant to the Stockholders Agreement (as defined below). In addition, Brown-Forman has agreed, subject to certain exceptions, it will not sell or otherwise transfer or dispose of shares of the Company’s common stock for a period of eighteen months following the Effective Time.
The Merger Agreement also provides for termination rights for both the Company and Brown-Forman. In addition to customary termination rights, and subject to certain limitations, the Merger Agreement can be terminated by (i) either Brown-Forman or the Company if the Merger is not consummated on or before November 16, 2024 (the “Outside Date”) or (ii) Brown-Forman upon the execution of a definitive agreement for a change in control of the Company prior to the Effective Time. Upon termination of the Merger Agreement in the event of a change of control of the Company, the Company would be obligated to pay Brown-Forman a termination fee of $5,000,000.
The foregoing description of the Merger Agreement, the Merger and the other transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement, which is filed as Exhibit 2.1 hereto and is incorporated herein by reference.
