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18 WINES&VINES November 2015 WINE INDUSTRY NEWS N apa, Calif.—About a year after most assumed that Treasury Wine Estates (TWE) would be subject to an ac- quisition bid, the Australian wine company has turned around and is buying most of Diageo's wine operations. Diageo, the British drinks giant, has agreed to sell most of its U.S.-based Chateau and Estate Wines division—along with the U.K.-based Percy Fox business—to TWE for $552 million. The deal is expected to close around the end of the year and includes $48 mil- lion in capitalized leases. "Wine is no longer core to Dia- geo, and this sale gives us greater focus," Diageo CEO Ivan Menezes said Oct. 13 in a news release an- nouncing the deal. "With the completion of this transaction, Diageo will have released £1 bil- lion ($1.5 billion) from the sale of non-core assets since the start of the financial year." Headquartered in Napa, Calif., Diageo Chateau and Estate Wines includes Beaulieu Vineyard, Chal- one Vineyard, Acacia Vineyard, Provenance Vineyards, Rosen- blum Cellars and Sterling Vine- yards. Diageo is keeping the Chalone brand and assets and the Acacia facility and vineyard. The Acacia brand and the others will be ac- quired by TWE, which already owns Beringer Vineyards, Chateau St. Jean, Etude Wines, St. Clement Vineyards and Stags' Leap Winery. TWE Americas operations also are based in Napa. TWE gains Blossom Hill, which is one of the largest California wine brands in the U.K. TWE's American wine division had been the subject of buyout ru- mors since 2013, and two compet- ing U.S. private equity groups tried to buy the company in September 2014. Their offers of around $3 billion, however, weren't enough to convince CEO Michael Clark and shareholders to sell. Clark's plan for TWE has been to improve sales through its pre- mium brands such as Beringer. The company just recently sold its sprawling Asti Winery and 275 acres of vineyards to E. & J. Gallo Winery for an undisclosed price. Diageo is primarily a liquor business, and its wine sales ac- counted for only about 4% of the company's total sales. The com- pany's key brands include John- nie Walker (whisky), Tanqueray (gin), Captain Morgan (rum) and Guinness (beer). In 2010, Diageo sold 17 of its Napa Valley properties for $269 million under a long-term lease- back deal with the option to extend those leases for up to 80 years. TWE's Clark said in a state- ment released by the company that the deal will be a "game changer" for the company's U.S. brands and should enable it to become a much larger player in the premium wine segment. —Andrew Adams TOP STORY Treasury to Buy Diageo Wine Brands for $552M Sterling Vineyards is among the wine brands Treasury Wine Estates will purchase from Diageo Chateau & Estate Wines. " Wine is no longer core to Diageo, and this sale gives us greater focus." —Ivan Menezes, Diageo CEO