Mondavi - how it all came apart
After Ted Hall's appointment as COB in January of 2004, he has been pursuing the elimination of the class 'B' shares (those held by the family that give 10-for-1 voting power) in order to lower a perceived risk of lawsuits for a public company that is disproportionately controlled by the Mondavi family.
Simultaneous to Mr. Hall's attempt to merge the two types of stock, the company was pursuing various strategic alternatives, including:
- Outright sale of the company
- "combination transactions"
- separating vineyards, production and marketing assets
- separating the luxury and lifestyle businesses
Apparently, company management recommended staying the course, but the board unanimously (therefore including family members) rejected this alternative and also unanimously determined that the company should be restructured. The board then told management to come back with a plan for separating the luxury and lifestyle businesses. The board also approved investigating the conversion of class 'B' shares to class 'A' shares at an exchange rate of 1.165, resulting in ~40% control for the Mondavi family, rather than the ~80% control they currently have.
One has to wonder about the coincidental timing of the two votes, however. Would the Mondavi's have given up voting control without an "ace in the hole?" Furthermore, given management's recommendation to keep the luxury and lifestyle businesses together, followed by the board's UNANIMOUS vote against that plan, followed by the board's recommendation to separate the luxury and lifestyle businesses, it seems pretty clear that the family gave up voting control in exchange for a break out of the luxury assets (namely Oakville). What remains to be seen is how they will do this without losing it to another buyer or creating shareholder lawsuits.