No more sour grapes

The Vincor saga shows how executives can often have conveniently short memories.

If warring nations had memories as short as executives of North American wine companies, maybe less blood would've spilled throughout history. This month, the board of directors of Vincor International Inc. of Mississauga, Ont., approved the company's purchase by Fairport, N.Y.-based Constellation Brands Inc. The takeover battle may have been hard-fought, but Vincor CEO Don Triggs denied reports of acrimony. Said Triggs, 61: “There was never any tension of any nature, other than negotiating on value.”

The drama began in early August 2005, when Vincor's shares plunged 13% after the company reported disappointing quarterly results. Smelling opportunity, Constellation fired off a proposal to acquire Vincor, and Constellation chairman and CEO Richard Sands met with Triggs and Vincor chairman Mark Hilson. Unable to drive a bargain behind closed doors, Sands publicly announced a $31-a-share all-cash offer worth $1.4 billion. Sands later raised it to $33 and suggested he'd go as high as $35 if Vincor would provide information necessary for due diligence. Vincor dug in. It branded the hostile bid “opportunistic and inadequate,” formed a special board committee to consider alternatives, and hired BMO Nesbitt Burns and Merrill Lynch as financial advisers.

Last fall, Sands expressed admiration for Triggs's accomplishments but roundly criticized Vincor's management. “Their mediocre performance, combined with aggressive acquisitions outside Canada, creates the perfect storm,” he told Canadian Business. Them's fightin' words. To Sands, Vincor lacked both “marquee brands” and the stature of other companies Constellation recently acquired, such as Robert Mondavi Corp. Sands made it clear Constellation had plenty of other opportunities, and ridiculed Triggs's contention that Vincor presented cost-saving synergies, or that it might be worth up to $36 a share.

Despite failing to drum up competing offers, Vincor wouldn't give ground. Triggs convinced shareholders to allow existing management to continue, and the bid expired in December.

Sands says the four investment banks involved (Citigroup and TD represented Constellation) didn't want to let the deal die (and forgo success fees). The bankers devised a framework to accommodate both Vincor's rigid price demands and Constellation's need to see confidential corporate information. On March 15, a contrite Sands called Hilson and talks began anew. Within weeks a deal was reached: subject to shareholder and regulatory approval, Constellation will acquire Vincor at $36.50 a share. Explaining why Constellation agreed to a price Sands once deemed preposterous, both CEOs chanted the same mantra: Value flows from diligence.

Triggs couldn't remember slams against his management team. “I don't recall any of that, and I'd be very interested if you had anything like that in print,” he told Canadian Business. Sands said arguments are part of the process. “Many times a deal has to fall apart before it will come together,” he said. “It wouldn't be any fun if everybody agreed on Day 1.”