Equity Method Investments

6 Months Ended

Oct. 31, 2024

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

Equity Method Investments

Our equity method investments include a 21.4% ownership of the common stock of The Duckhorn Portfolio, Inc. (“Duckhorn”), which we obtained as partial consideration for our sale of the Sonoma-Cutrer wine business to Duckhorn on April 30, 2024. Our other equity method investments are immaterial.

The carrying amount of our investment in Duckhorn was $267 million as of April 30, 2024, reflecting the fair value of the common stock, based on its quoted market price at the April 30, 2024 closing date of the transaction. The carrying amount as of October 31, 2024, was $269 million, which includes the initial carrying amount of $267 million and $2 million subsequently recognized for our share of Duckhorn’s earnings.

The difference between the carrying amount of the investment and our proportionate share of the net assets of Duckhorn was not material as of both April 30, 2024, and October 31, 2024. As of October 31, 2024, the fair value of the investment was $346 million.

In connection with our sale of the Sonoma-Cutrer wine business to Duckhorn, we agreed to a lock-up provision under which we are restricted from selling or otherwise disposing of our equity investment in Duckhorn. The restriction period will terminate no later than October 31, 2025.

Also, effective April 30, 2024, we entered into a transition services agreement (TSA) with Duckhorn related to the sale of the Sonoma-Cutrer wine business. Our cost of sales for the three months and six months ended October 31, 2024, included $2 million and $24 million, respectively, for Sonoma-Cuter products purchased from Duckhorn under the TSA. Fees earned for transition services provided to Duckhorn under the TSA were immaterial. Services related to the TSA ended on or about August 31, 2024.

On October 6, 2024, Duckhorn entered into a definitive agreement pursuant to which Duckhorn will be acquired by private equity funds. Under the terms of the agreement, upon completion of the proposed transaction, we would receive cash of $350 million in exchange for our 21.4% ownership interest in Duckhorn. The completion of the transaction, which is expected to occur by April 30, 2025, is subject to customary closing conditions, including approval by Duckhorn’s stockholders.