Constellation Brands, Inc. Conference Call to Discuss the Proposed Acquisition of The Robert Mondavi Corporation - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Hello, everyone, and welcome to the Constellation Brands conference call. Today's conference call will be led by Richard Sands, Constellation's Chairman and Chief Executive Officer. After the prepared remarks there will be a question and answer session. If you would like to ask a question simply press star then the number 1 on your telephone keypad. If you would like to withdraw your questions press star then the number 2 on your telephone keypad. All participants are placed in a listen-only mode. This call is being recorded. Your participation implies consent to our recording this call. If you don't agree to these terms simply drop off the line. I would now like to turn the call over to Ms. Philippa Dworkin. Please, go ahead, Ma'am.

PHILIPPA DWORKIN, SVP CORPORATE COMMUNICATIONS & INVESTOR RELATIONS, CONSTELLATION BRANDS, INC.: Thank you, Operator, and good morning, everyone. I'm Philippa Dworkin Senior Vice President of Corporate Communications and Investor Relations at Constellation. I need to quickly read through some Safe Harbour language. I'd also like to remind you that a copy of the media release we issued this morning, including the attachments, are available on the internet at Constellation's website, www.cbrands.com under investors. Please, also, be aware that during this call we may make forward-looking statements within the meaning of section 27 A of the Securities Act of 1933 and section 21 E of the Securities Exchange Act of 1934. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond Constellation's control, that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. For a detailed list of the risk factors as well as additional information, please refer to our media release from today. If you have further questions and you're an analyst or in the financial community please call our Director of Investor Relations, Lisa Schnorr at 585-218-3677. If you're a member of the media please call either myself or Mike Martin. At this point it's my pleasure to turn the call over to Richard Sands, Chairman and Chief Executive Officer of Constellation Brands. Richard?

RICHARD SANDS, CHAIRMAN & CEO, CONSTELLATION BRANDS, INC.: Thank you, Philippa. Good morning and thank you for joining us on such short notice. By now you've probably seen the media release we issued announcing our offer to acquire the outstanding stock of the Mondavi Company. The Media release included a copy of the offer letter we sent to the Mondavi Directors and subsequent correspondences between the 2 companies. A week ago we confidentially approached Mondavi's Chairman and requested that our 2 companies commence discussions with respect to our offer. It has always been our preference to negotiate with Mondavi on a confidential basis. However, Mondavi's announcement yesterday of their receipt of a proposal to acquire the company will cause speculation with respect to our stock and theirs. Therefore, we felt compelled to publicly disclose our identity and the details of our premium, all cash offer and to fill in the gaps left by Mondavi's disclosure. I'd like to spend the next few minutes outlining the terms of our offer to Mondavi and why we believe it's a superior alternative to the restructuring exercise proposed by Mondavi's management. Our offer is superior to Mondavi management's restructuring exercise by any standard. It represents a significant premium to Mondavi's stock price. We are offering $53 per share for the outstanding class A shares and $61.75 per share for the outstanding class B shares. That is a 37% premium to the closing price of Mondavi stock on October 11th, the day before we made our offer. Furthermore, our offer respects the premium allocation between the class A and class B shares that Mondavi arrived at in connection with its proposed recapitalization. Our all cash offer also represents a significant premium to Mondavi management's projected equity value based on management's proposed restructuring.

Last month, at a Banc of America Investor Conference, Mondavi management projected that over time Mondavi can achieve a total equity value in the range of 749 to $929 million. That assumes the divestiture of Mondavi's luxury brands at favorable valuation levels and through a business restructuring that management indicated may take up to a year to complete. We are offering $970 million for the whole company today. Our offer exceeds the high end of the Mondavi management's range of projected equity value and represents a 29% premium to the low-end of the range. Furthermore, our offer represents a multiple of 14 times Mondavi's 2004 EBITDA, an attractive valuation for any Mondavi shareholder. And finally, Mondavi management's restructuring exercise is latent with risk as outlined in their preliminary proxy statement filed October 8th, 2004. Now, if someone tries to convince you that the risks outlined in their proxy are nothing more than, quote, boilerplate legal language, end quote, let me assure you these risks are real. By contrast, our offer is for cash that you can take to the bank today, which eliminates the risk inherent in Mondavi management's restructuring exercise. By the way, we'd like to clarify a couple of things. Mondavi's press release from yesterday indicated that Mondavi had declined a request to suspend implementation of its proposed recapitalization. Our letter made clear that our offer is not conditioned upon finalization of Mondavi's capitalization plan and we see no reason to delay our proposed combination. However, we have made several serious requests that Mondavi refrain from disposing of any assets or otherwise pursue a restructuring plan that would adversely affect the premium we are making available to Mondavi shareholders. And we have made that very clear to Mondavi.

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