This smells like the work of shake-down artists. From today's Napa Valley
Register (front page), Napanews.com

Full text below the URL

---Bob



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Mondavi sued for not accepting $1.3 billion offer
Friday, October 22, 2004

By GABE FRIEDMAN
Register Staff Writer

Three class action lawsuits have been filed against the Robert Mondavi
Corporation, saying the company's board has acted inappropriately related to
this week's $1.3 billion buyout offer from wine industry giant Constellation
Brands.

The Mondavi company and its board of directors were sued for not disclosing
details of the $1.3 billion offer to shareholders before voting not to accept
the offer immediately as the company goes forward with a plan to sell off key
assets in Napa Valley and elsewhere.

In two cases, board members are accused of putting their own interests before
shareholders. In one of those cases, they are accused of inappropriately
structuring the proposed divestiture of assets to favor the Mondavi family and
Constellation Brands. Details of the third case were not available at press
time.

"It's not surprising," said Hilary Martin, a Mondavi spokeswoman. "We feel
strongly that these lawsuits are unmerited and we intend to fight them
vigorously."

Two of the suits name as defendants the company and all members of the
company's board of directors, including Chairman Ted Hall, family member Marcia
Borger Mondavi, and local attorney Frank Farella, as well as Mondavi President
and CEO Gregory Evans.

Earlier this year, Mondavi Corporation leaders announced plans to divest the
winery's luxury assets, including the Robert Mondavi Winery in Oakville, a
half-share of Opus One, three large Napa Valley vineyards and several other
properties. The company plans to keep Central Valley winery and vineyards
associated with high-volume brands such as Woodbridge. The divestiture of
assets was to begin later this year, and Mondavi officials had said publicly
the assets to be sold might be worth as much as $500 million, while the overall
value of the restructured company would be worth as much as $929 million.

Last week, Constellation Brands approached Mondavi with a $1.3 billion offer
for all existing shares. Constellation, which controls several powerful wine
and beer brands, offered $53 for common shares, and $61.75 for Class B shares
owned by members of the Mondavi family and others. There are approximately 16.5
million shares in Mondavi.

The Mondavi board of directors met Monday and decided not to immediately act on
the offer. Officials said they would consider Constellation's bid, but would
proceed with the previously announced plan to split the company.

When Mondavi officials disclosed that an offer had been made for all shares,
Mondavi stock immediately surged from less than $40 a share to more than $50 on
speculation that other bidders might join Constellation. The stock rose 78
cents Thursday to $52.63 a share.

On Tuesday, Constellation released letters from its CEO, Richard Sands, to
Mondavi Board Chairman Ted Hall. In the letters, Sands laid out details of
Constellation's offer and questioned whether the Mondavi board, in delaying
full consideration of the offer, was acting in the best interest of
shareholders.

Sands' comments surfaced in at least two of the lawsuits filed this week.

A suit in Napa Superior Court on Tuesday was filed on behalf of
Connecticut-based Bamboo Partners, a technology company that is a shareholder
in the Mondavi Corporation. Another suit was filed by shareholder Robert Lewis.

Both cases were brought by national law firms that specialize in shareholder
lawsuits against corporations. In fact, the firms are descendants of Milberg
Weiss Bershad Hynes and Lerach, a controversial firm that has earned several
million-dollar-plus settlements, but has also been criticized for bringing
cases where there is little evidence of corporate wrongdoing.

"If you look at 100 of these (shareholder) lawsuits, you'll find the same firms
over and over," said Andy Demetriou, an attorney with Los Angeles-based
Fulbright and Jaworski. "There are times when they've exposed great cases of
breaches of fiduciary responsibility and other times when they haven't."

The lawsuit filed on behalf of Bamboo Partners claims the Mondavi directors
"have not and are not exercising independent business judgment and have acted
and are acting to the detriment" of shareholders.

On the day that Mondavi announced it had rejected an all-cash buyout from an
unnamed suitor, stock rose 30 percent to a three-year high. Yet the suit claims
the decision regarding Constellation deprived shareholders of "maximum value."

The second lawsuit, filed on Thursday, alleges that the Mondavi board of
directors "spent substantial efforts tailoring the structural terms of the
acquisition to meet the specific needs of Constellation Brands Inc. and certain
members of the Mondavi family."

That suit seeks to stop the acquisition, though the Mondavi Corporation
specifically delayed acting on Constellation's offer.

The board, the lawsuit states, "will not supply to Mondavi's minority
stockholders sufficient information to enable them to cast informed votes on
the proposed acquisition and may consummate the proposed acquisition to the
irreparable harm" of the shareholders.

While the cases both allege wrongdoing by board members, in other ways they
diverge significantly. Regardless, the cases suggest the Mondavi transaction
may become mired in court appearances and legal wrangling.

"I hesitate to say anything is meritless but there doesn't seem to be a lot of
substance," said John Hinman, a wine industry attorney in San Francisco who is
not involved in the litigation. "The allegations are very general."