Jeanjean and Laroche merger

The JeanJean and Laroche Groups signed an agreement on September 22 to implement their full merger in the coming months

The operation, which remains subject to  approval from the AMF (the French financial markets authority), paves the way for the creation of a new French leader in the premium wines sector, with over 1,450 hectares of exceptional vineyards, a portfolio of prestigious brands and an annual turnover of some €200m, of which almost 50% comes from the international market.

The merger, approved by both families, is underpinned by complementarity: of sales networks, the quality and types of wines sold, expertise and premises and vineyards. It will drive an acceleration of growth in sales and margins and is based on a shared goal: the quest for quality and optimal expression of each wine-producing terroir, conveyed by a brand of excellence: Laroche

The new Group, which will be renamed following the merger, will bring all the JeanJean and Laroche houses under a single umbrella organisation. As a result, it will benefit from a richer and more diversified brand portfolio, incorporating highly prestigious vineyards.

From JeanJean: Ogier and le Clos de l’Oratoire in Châteauneuf-du-Pape, Gassier in Provence, Antoine Moueix in Saint-Emilion, Rigal  in Cahors, JJeanJean in the Languedoc, Cazes in Roussillon.
From Laroche: Chablis and the Languedoc in France plus Chile and South Africa.

Immediate and wide-reaching sales synergies will be made through a joint sales force and marketing team with a centralised management organised into specialist teams per network and per brand. This will enable Laroche to ensure a tenfold increase in its field presence and therefore its sales – particularly in the international export sector – and certain brands in the JeanJean Group to benefit from the Laroch Group’s selective sales network.

The new Group will also generate significant cost savings through non-wine purchases, credit conditions for the Laroche Group with a rescheduling of its debt, and site management and centralised functions.

The planned merger between the two companies in the form of ‘merger by absorption’ of Laroche SA by JeanJean SA will be submitted for approval at Extraordinary General Meetings to be held before January 2010. A merger document will be submitted to the AMF for approval.

The proposed parity is one JeanJean share for 2.3828 Laroche shares. Prior to the EGMs which will be convened to vote on the merger, JeanJean will
acquire a block of 10.8% of the Laroche family holding in Laroche SA. This acquisition will equally be subject to approval from the AMF of the merger documentation. In order to remunerate the Laroche share contribution, JeanJean SA will issue new shares to the amount of €24,711,277. JeanJean SA will absorb the net debt of Laroche SA, i.e. €28m.
In order to strengthen the new Group’s financial structure and to finance part of the Laroche share acquisition, JeanJean will launch a capital increase operation, with maintenance of preferential subscription rights, to an amount of between €5m and €7m at the beginning of 2010.

On the basis of the current share price of JeanJean, and before the equity capital increase, the financial gearing will be modified, between December 2 and Deecember 31, 2009, to achieve a maximum of 1.7 post-merger, with the following breakdown of capital at JeanJean SA.

JeanJean family: 54.3%
Laroche family: 12.7%
Management:  2.8%
Company owned: 4%
Public:   26.2%

Antoine Leccia, chairman of the JeanJean executive board said: “The merger is in line with the current movement towards increasing levels of consolidation in the French wine industry. Equally, it is an essential step towards meeting future challenges in the international wine world. It will support the JEANJEAN Group’s development strategy of moving towards premium wines, by incorporating prestigious vineyards and brands with strong regional roots into its organisation, in order to increase the presence of our terroirs internationally and to promote each of our vineyards as a unique French-style cultural experience.
“ The new Group will continue to pursue these ambitious, long-term goals and the synergies and major cost savings that will result will ensure we have the means of achieving our ambitions”.

Michel Laroch, chairman of the Laroche executive board said: “In the current, difficult economic climate, the proposed merger with JeanJean offers us exceptional growth perspectives. The pooling of our skills and our complementarity will provide us with the means to continue our development of premium brands, both in France and internationally, while significantly improving the profitability of both groups”.

Bernard JeanJean, chairman of the JeanJean supervisory board said: “This operation will create a high level of value for all our shareholders, customers and employees. It guarantees the sustainability of a vision that is crucial to the creation of a new French Group that is destined to become a leader in the international wine sector within the next 10 years”.

About JeanJean:
A leading producer of premium quality wines in the South of France with wineries throughout the southern half of the country. In the financial year ending December 31, 2008, the Group posted a turnover of €174.3m, an operating result of €4.8m and a net result (group share) of €1.2m.

About Laroche:
A producer of premium quality wines in Chablis, the South of France, Chile and in South Africa. In the financial year ending March 31, 2009, the Group posted a turnover of €27.3m,  an operating profit of €40,000 and a net result (group share) of €-1.6m

Below: Michel Laroche; Antoine Leccia; Bernard Jeanjean

1 September 2009 - Felicity Murray