On April 30, 2024, (the “Closing Date”) the Company acquired 100% of the equity of Sonoma-Cutrer Vineyards, Inc., a wholly owned subsidiary of Brown-Forman Corporation (“the Merger”) which includes six estate vineyards spanning approximately 1,100 acres. Under the terms of the merger agreement, the Company acquired Sonoma-Cutrer for consideration valued at $317.5 million on the date of the closing of the acquisition. The Closing Date purchase consideration, inclusive of preliminary working capital adjustments, was comprised of $49.6 million, funded from the revolver portion of the Company’s Credit Facility, and 31,531,532 shares of common stock issued for $267.1 million, determined based on the closing stock price of the Company’s stock of $8.47 per share on April 30, 2024. The Company estimates that $0.8 million of additional cash consideration will be payable within 90 days of the Closing Date pursuant to the working capital provisions included within the merger agreement, which is a preliminary estimate and subject to further adjustment.

The addition of Sonoma-Cutrer to the Company’s portfolio of luxury winery brands expands the Company’s portfolio of luxury Chardonnay and adds a well-renowned brand to the Company’s portfolio. Sonoma-Cutrer produces and markets its luxury Chardonnay wine brand, sourced from vineyards in the Russian River Valley and Sonoma Coast appellations.

During the three and nine months ended April 30, 2024, the Company incurred $4.2 million and $8.6 million, respectively, of third-party transaction costs recorded in selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.

The Company allocated the fair value of the purchase consideration to the assets acquired and liabilities assumed as of the Closing Date based on their estimated preliminary fair values. The excess of purchase consideration over the preliminary fair value of net assets acquired is recorded as goodwill. Due to the timing of acquisition close and magnitude of the acquisition, the preliminary fair value estimates and assumptions are subject to change as the Company obtains additional information over the measurement period. The primary areas of the purchase accounting that remain preliminary for completion of the related valuations relate to, but are not limited to, inventories, property and equipment, the intangible asset and related deferred tax impacts.


(in thousands)	Amount
Total purchase consideration	$	317,464

Assets acquired:

Inventories	$	61,419
Prepaid expenses and other current assets	372
Property and equipment, net	244,780
Intangible asset (Trade name)	17,000
Other assets	246
Total assets	$	323,817

Liabilities assumed:
Current liabilities	$	(2,848)
Due to related party (Note 13)	(953)
Deferred income taxes	(60,959)
Other liabilities	(202)
Total liabilities	$	(64,962)

Goodwill	$	58,609

The intangible asset is recorded at fair value, as determined by Management based on available information. The fair value assigned to the trade name was determined using the income approach, specifically the relief from royalty method. The Company applied significant judgment in determining the fair value of the intangible asset, which involved the use of Level 3 inputs, including estimates and assumptions of future revenues, royalty rate and discount rate. The trade name is determined to have an indefinite useful life.

Goodwill related to the Sonoma-Cutrer acquisition is attributed to the benefit of a skilled workforce, brand strength in the luxury Chardonnay wine market, planned growth in new markets and synergies from combined sales, operational and administrative functions. The goodwill is deductible for tax purposes over a 15-year life.

For the three and nine months ended April 30, 2024 and 2023, the following table contains unaudited pro forma Condensed Consolidated Statement of Operations information of the Company as if the acquisition of Sonoma-Cutrer closed on August 1, 2022, the first day of Fiscal 2023.

The supplemental pro forma disclosures in the table above include adjustments for (i) depreciation expense that would have been recognized related to the acquired property and equipment, (ii) additional cost of sales related to the inventory valuation adjustment, (iii) acquisition-related costs, such as third party transaction costs, (iv) incremental interest expense associated with additional drawdown on the existing revolving line of credit, (v) fees in connection with the transitional services agreement, see Note 13 (Related party transactions) and (vi) the estimated income tax effect on the pro forma adjustments.