Winery Sales Continue at Brisk Pace

Far Niente Wine Estates announces investment from private equity firm

by Paul Franson
far niente wine estates
Private equity firm GI Partners made an investment in Far Niente Wine Estates, which includes Far Niente Winery as well as its four sister wineries, the Napa Valley Cabernet producer announced today.

Oakville, Calif.—Far Niente Wine Estates confirmed today that it was selling a majority interest in the company to GI Partners of Menlo Park, a private equity firm with $12 billion in capital commitments from institutional investors.

Founded in 1979, the Far Niente group encompasses four winemaking facilities, 300 acres and 75,000 cases total production. The historic Far Niente estate produces 30,000 cases of Cabernet Sauvignon and Chardonnay with an average price of $65 at its Oakville facility, plus 20,000 cases of Nickel & Nickel wines, 1,500 cases of Dolce sweet wine, 10,000 cases of EnRoute wines and wines from the newest winery in the group, Bella Union.

Members of founder Gil Nickel’s family and key winery executives will remain as shareholders and managers, according to Dirk Hampson, chairman and director of winemaking. He described the deal as a strategic investment in the company, including vineyards, wineries, brands and a farming company, Vinescape. GI Partners acquired a controlling interest in Duckhorn Wine Co. in 2008.

The announcement came one day after Jackson Family Wines announced the purchase of Copain Wines in Healdsburg, Calif., and three weeks after the annual North Bay Business Journal Wine Conference tackled the subject of mergers and acquisitions.

Acquisition trends
One member of the panel at the North Bay Business Journal Wine Conference was Pat Roney, president of Vintage Wine Estates, which has acquired a number of brands in the past year including Clos Pegase, Viansa, Swanson and B.R. Cohn.

“Consolidation is driving a lot of M&A activity. Distributor consolidation is putting the squeeze on smaller wineries. Southern Wine & Spirits, itself just merged with a competitor, plans to eliminate 35% of its brands,” he said.

Roney feels this trend will continue, which pushes companies like his to add more brands. “Making even 1.5 million cases is not important enough to distributors.”

Robert Nicholson, a prominent broker with International Wine Associates, added that few of the properties being sold are distressed. “American wineries want to expand their portfolios; international buyers want improved access to the U.S. market.”

The broker said he sees all types of buyers: strategic (other wineries seeking brands, vineyards or production), families, international companies and financial firms. They’re looking for well-run wineries, especially in Pinot Noir and Cabernet Sauvignon in top areas. “Those are costly to build from scratch,” he said.

A few years ago, wineries were buying vineyards, noted Carol Collison, partner in Global Wine Partners, but now some of the biggest players (Gallo, Wine Group, Jackson and Constellation) are buying brands, too, for the first time in years.

Collison said she expects more deals this year than average. “We’ve seen about 20 transactions a year according to the Wines & Vines database, but we’re seeing better quality now.”

She added that foreign buyers are focused on Napa and want real estate.

And while consolidation in distribution is pushing many wineries to focus on direct-to-consumer sales, Collison said, “No one wants to buy your direct-to-consumer (DtC) brand. They don’t see an exit strategy for DtC brands.”

Tim Wallace, who was president of Benziger Family Winery before it was acquired by The Wine Group, attributes some of the activity to consumers moving up. “Big wineries want to address that market segment better.”

In other merger news, at the Oregon Wine Symposium in February, Mark Freund of Silicon Valley Bank said 38% of winery owners there were considering selling their businesses.

Another merger expert is Mario Zepponi, a partner at Santa Rosa, Calif.-based Zepponi & Co., which helped broker a deal between Jackson Family Wines and Penner-Ash Cellars.

“The market is so strong that some people have reached a point in their lives where they feel it’s a good transition point to at least have the discussion,” he said. “There’s a lot of interest in the Northwest, both inside and from outside.”

“I would expect to see a continuation of this,” Zepponi said. “I think there’s still a long enough runway for this to continue on for at least the next 12 to 24 months.”

Sales roundup
In addition to Far Niente Wine Estates, nine other transactions have been reported in the past month or so.

Jackson Family Wines announced the purchase of Healdsburg-based Copain Wines from owner/winemaker Wells Guthrie and San Francisco-based Murano Group on May 16. Copain specializes in Pinot Noir, Chardonnay and Syrah, much from Anderson Valley in Mendocino County. The Copain Wines tasting room will remain open.

Ste. Michelle Wine Estates bought Patz & Hall Winery in Sonoma, Calif., best known for Pinot Noir and Chardonnay. The deal includes a winery and tasting room, but no vineyards as the company buys grapes from top vineyards. All four founding partners will remain with the winery. The deal expands Washington State-based Ste. Michelle’s Pinot Noir portfolio.

Bill Foley’s Foley Family Wines of Healdsburg, Calif., bought Stryker Sonoma Winery in Sonoma County’s Geyserville including inventory, a 20,000-case production facility and 25 acres of vineyards in Alexander Valley. The winery will become Foley Sonoma, and Foley’s daughter Courtney Foley will become its winemaker. The new owner intends to move the wines into distribution as high-end products retailing from $50 to $65.

Napa Valley winemaker, Kirk P. Venge’s Venge Vineyards bought Robert Rue Vineyard and Winery in Sonoma County’s Russian River Valley and renamed it Croix Estate. Venge plans to use Croix Estate for small-production, luxury-class, single-vineyard Chardonnay and Pinot Noir wines as well as Zinfandel from the estate’s 8 acres of 105-year-old vines. Venge’s purchase included a 5,000-case winery and tasting room and vines.

Diane and Ken Wilson’s Geyserville, Calif.-based Wilson Artisan Wineries bought 1,500-case Greenwood Ridge Vineyards in the Anderson Valley of Mendocino County. Greenwood Ridge makes at least 11 different wines including late-harvest Riesling, Pinot Noir and a second brand, Hundred Point. The Wilsons own 10 wineries and more than 600 acres of vines in Sonoma and Mendocino counties. This is their first purchase in Anderson Valley.

Rajat Parr, Sashi Moorman and Steve Webster purchased Sandhi Wines in Santa Barbara County from Terroir Capital. They also own 65-acre Domaine de la Côte in the Santa Rita Hills and Evening Land Seven Springs Estate in the Eola Amity Hills in Oregon.

Jackson Family Wines bought most of 15,000-case Penner-Ash Wine Cellars’ assets, including the winery and 15 acres of vineyards. Winemaker Lynn Penner-Ash will stay on while Jackson Family Wines provides sales, marketing, distribution and back-office administrative support. Jackson bought space for a local headquarters and winemaking facility in McMinnville, Ore., in January after buying hundreds of acres of Oregon vineyard land since 2013.

Rob Wallace of Del Rio Vineyards bought the 215-acre Birdseye property in southern Oregon for $2 million from Ted Birdseye, whose ancestors settled on the property in the 1850s. Wallace, with co-owners Jolee and Lee Traynham, expects to plant 175 acres of wine grapes on the property. Wallace now has 300 acres of vineyards and sells the grapes to Willamette Valley wineries. It also produced 30,000 cases of its own wine and sold 275,000 gallons of bulk wine last year.

Sean Tudor of 2dor Wines and Robert Smasne of Smasne Cellars purchased the 12,000-square-foot former Olsen Estates winery in the Vintners Village in Prosser, Wash. The Olsen family closed it in 2011 to focus on growing grapes. Smasne’s 3,000-case production will move to the new facility, and it has closed its tasting room in Kennewick.

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