Shares of Oakville, Calif.-based winery Robert Mondavi (NASDAQ:MOND) rose more than 9% in Monday trading following the announcement that it intends to submit a plan that would eliminate its class B shares to stockholders at the company's October annual meeting.
It's a move that should win approval for at least two reasons. First, it's investor-friendly, and second, given the current state of the wine business, it may have some folks thinking that a buyout, or some other kind of transaction, is in the works. We'll discuss both angles in this story.
First things first. As noted in the company's press release, Mondavi currently has some 10.7 million class A shares outstanding. Each gets one vote. Its 6 million class B shares, meanwhile, have 10 votes each and are locked up by the Mondavi family. Should the plan go through, it would lower the family's financial interest slightly and its voting interest by more than half (to just less than 40%).
The second point follows on. Entrenched interests are frequently the bane of investors who fear that consolidated power within their companies may mean the decisive moves needed to maximize value don't happen as they should. Whether this is the case at Mondavi or not, it would be rendered effectively moot with the family's voting interest falling below 50%.
The timing of the announcement, coupled with the news that Mondavi intends to divide its business into the lower-cost "lifestyle" and pricier "luxury" segments, can only please investors who believe one or more of the below:
- Potential family opposition to a takeover would be removed.
- Separating the business into distinct segments may herald a spinoff or other transaction.
- The market, given recent news from companies such as Golden State Vintners (NASDAQ:VINT) and Chalone (NASDAQ:CHLN), is looking for deals.
But while yesterday's news is significant for investors, it shouldn't come as a total surprise. The company made a similarly investor-friendly move earlier this year in appointing "outsider" Ted Hall its nonexecutive chairman. All in all, these are signs that point to an open-minded management structure that appears to have investor interests in mind. That's not something that can always be taken for granted.
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Fool contributor Dave Marino-Nachison doesn't own any of the companies in this article.
