updated 11/4/2004 8:35:58 AM ET 2004-11-04T13:35:58

The Robert Mondavi Corp. is being acquired by alcoholic beverage giant Constellation Brands Inc. in a $1.03 billion cash deal, ending a plan to split apart the brands of one of California’s most storied winemakers.

The announcement Wednesday came roughly two weeks after Constellation, the world’s largest wine producer whose portfolio also includes Corona Extra and St. Pauli Girl beers, offered to buy the entire Mondavi company for $970 million.

Mondavi executives, who had only wanted to sell off the luxury side of business, initially reacted coolly to the proposal. They changed their minds after Constellation sweetened its offer.

“After careful consideration of our strategic alternatives, our board of directors concluded that this transaction with Constellation is in the best interests of The Robert Mondavi Corp.’s shareholders, employees and the Robert Mondavi brand,” said Ted Hall, Mondavi’s chairman.

Under the terms of the agreement announced Wednesday, Constellation will acquire all the outstanding shares of Mondavi for $56.50 per share for Class A common stock — a 3.2 percent premium to Mondavi’s closing price of $54.75 on the Nasdaq Stock Market before the deal was announced. Mondavi Class B shareholders will receive $65.82 per share. Constellation will also assume $325 million of Mondavi debt as part of the transaction.

In late trading Wednesday, Mondavi’s Class A shares rose another 2 percent to $55.85. Constellation shares fell a penny in the extended session to $41.54 on the New York Stock Exchange.

Mondavi shares have surged roughly 40 percent since Constellation’s Oct. 19 bid.

As part of the acquisition, Robert Mondavi, who founded his namesake winery with his eldest son in 1966, will remain involved in the business and will serve as a “brand ambassador” while working out of his office at the winery, Constellation chief executive Richard Sands said.

“Robert Mondavi put the California wine industry on the map, and we’re committed to further enhancing the prestige of the flagship Robert Mondavi winery as well as giving it the recognition it deserves throughout the world,” Sands said.

It was not clear what role would be played by other Mondavi family members. In October, founder Robert Mondavi’s son Michael stepped down from the board in disagreement with the strategy. Michael’s brother, Tim, also has resigned, but remains as consulting winegrower and member of the board. Both brothers had separately indicated interest in trying to buy parts of the winery before Wednesday’s sale. A sister, Marcia Mondavi Borger, is a board member.

“We have further conversations to have,” Sands said.

In addition to its beers, Constellation Brands, based in Fairport, N.Y., also has a number of wines, including Ravenswood and Almaden.

Mondavi had announced in September that it wanted to sell off the luxury side of its business, refocusing energies on under-$15 brands such as Woodbridge.

But on Wednesday Mondavi’s board said it would no longer seek shareholder approval for a proposed reincorporation and recapitalization plan. Mondavi also postponed a shareholder meeting that had been scheduled for Nov. 30.

The companies expect to complete the deal, which is subject to shareholder approval, by the end of 2004 or early 2005.

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