Napa, Calif.—From all reports, many winery owners would like to sell their businesses—and many organizations are out there looking. But matching the interests of both parties can be challenging. One of the many interesting sessions at the 20th Wine Industry Financial Symposium this week in Napa was devoted to just that subject, and others elaborated.

On the opening day of the conference attended by 260 lenders, investors, winery owners, grapegrowers and others in a session about capital, Robert Nicholson of International Wine Associates pointed out that recently the range of winery sales has been dramatic.

He cited reported prices. The first group was “asset-rich acquisitions.”

• Pacific Rim (185,000 cases per year) to Banfi (price confidential but high; Nicholson handled it)
• Seghesio (94,000 cases) to Crimson/Leucadia for $86 million
• Sloan Estate, a 500-case winery in Napa County's Rutherford, to Goldin Financial (Chinese buyer) for $50 million
• Landmark (25,000 cases) to Roll (Fiji Water) for $22 million
• Diageo/Paragon to Gallo (price confidential)

The second list included brands or troubled properties.

• Buena Vista (55,000 cases) brand from Ascentia to Boisset for $9 million
• Renwood (110,000 cases) (in bankruptcy) to Bulgheroni (Argentina) for $8 million
• Cartlidge & Brown (210,000 cases) brand to Vintage for $5 million

Why the diverse range? Part was due to the assets, but other issues are also involved.

A lesson in diversity
A session the next day discussed two recent high-profile acquisitions.

Jeff Menashe, CEO of Demeter Group, brought together principals from two deals he had arranged:

• Acquisition of 50,000-case Justin Winery in Paso Robles by Stewart Resnick’s Roll Global (which also owns Fiji Water and subsequently acquired Landmark Vineyards in Sonoma Valley).

• Acquisition of venerable Seghesio by the Crimson Wine Group, part of publicly held Leucadia Corp.

Demeter Group was also involved in the sale of the Oakland, Calif.-based 250,000-case Rosenblum Cellars to Diageo, Flowers (20,000 cases) to Huneeus (Quintessa), and Landmark to Roll.

Justin Baldwin said he was first attracted to the Central Coast’s Paso Robles area 30 years ago because of how reasonable land and farming costs were compared to other wine regions such as Northern California. “The quality-to-value ratio was excellent,” he stated.

Baldwin came from the financial business and carefully applied good accounting principles to his business. “We grew nonstop in a stair-step pattern to almost 100,000 cases. We were always on allocation,” he said.

He also realized that to get to the next level in the business, he’d either need more resources or be limited to baby steps, so he decided to take a look at his options.

Baldwin didn’t want to broadcast his desire to the market, so he engaged Demeter Group to look at possibilities. “We weren’t in trouble, and didn’t want anyone to think we were,” he said.

Demeter Group’s Menashe didn’t confine himself to the usual suspects, but looked beyond wine to “adjacent” industries. Fiji seemed a good match, with a vast network of sales people already calling on similar accounts.

“I liked the fact that Stewart (Resnick) was mainly in ag-based businesses (Pom and pistachios, for example, and purportedly the largest agricultural holdings in California). Resnick understood ag and the time line, Baldwin said. “The sales force and the fact that his was a family business were also important.”

Resnick was familiar with farming and other aspects of the business, and Fiji had grown rapidly for eight years. “I thought the sales force was underworked,” he said.

Also a wine collector, “Justin seemed the perfect match,” he said. Resnick joked that he was a little disappointed that he had to pay “retail,” but found all representations about the deal were true. “That doesn’t always happen.”

He’s in no hurry to change things that are working, but is looking for vineyards to expand production. “I want a reasonable return, however. I’ve seen some only paying 2%, some 7%. Seven percent isn’t attractive, but it’s better than 2%,” the investor admitted.

He believes Paso Robles is reasonable—but not Napa. “Napa from the investment standpoint doesn’t make sense for me. Creating value is fine—but we also create income.” He said Sonoma might be a better bet.

Rare in California, the Justin property also has an inn and restaurant. Resnick is looking at ways to leverage them, without spending a fortune on expansion.

Menashe also connected Seghesio and Crimson. Seghesio, of course, is a respected producer of Zinfandel in Sonoma’s Dry Creek Valley, where the family has grown grapes and made wine for four generations.

Peter Seghesio is winegrower at his family’s estate. He’s worked there 25 years, and became CEO in 2004. “I always tried to run the company as if we were going to sell it,” he said. “We needed that financial discipline.”

In 2008, he spoke with a potential buyer, but realized that talks to suitors might get out and destabilize the company and its markets. Instead, he hired Menashe to work with him.

“Jeff gave me an outsider’s perspective. He’s not a mean guy, but he kept me on track: ‘Drive margins. Drive FOB.’”

Reasons to sell
In the end, Seghesio found three good reasons to sell:

Distribution: “We’d have to be really big or really small. The channel is going to be incredibly challenging for the next 25 years.”

Second was diluted ownership. “We have 11 owners in this generation, and would have 30 in the next,” he said. “Some family members wanted to cash out, and I didn’t want to take on the debt to buy them out.”

And the company was doing very well. “We were at the top of the game,” he admitted.

Menashe introduced him to Erle Martin, CEO of Crimson, which also owns Pine Ridge (90,000 cases) in Napa Valley, Archery Summit (10,000 cases) in Oregon and Chamisal (20,000 cases) in Edna Valley, Calif. Martin was formerly president of 20,000-case Niebaum-Coppola/Rubicon.

“Crimson is part of Leucadia International, but it acts like a private company,” Martin said. “We have a strong sense of stewardship and what’s made brands what they are. We’re not changing Seghesio. We love what they’re doing.” Crimson is upgrading facilities, however.

Crimson’s brands are distinct. Pine Ridge has 200 acres in Napa Valley and specializes in Cabernet. Archery Summit has 100 acres in Oregon and focuses on Pinot Noir, while Chamisal has 100 acres and makes Chardonnay and Pinot in the Burgundian style.

Seghesio has 300 acres in Dry Creek Valley (The family is keeping some land), and is best known for Zinfandel and Italian varieties, so complements the others.

“We share backroom functions and obviously have synergies for distribution with a quarter-million cases,” Martin said, but the brand identities are distinct, with different winemakers, families and back-stories. “We do hope to cross-pollinate the brands in direct-to- consumer sales.”

Martin has recently expanded Pine Ridge’s Forefront second label, which uses purchased fruit and excess estate wine. He expects to expand to meet great demand, notably Pine Ridge’s popular Viognier/Chenin Blanc white, Seghesio’s Sonoma County tier (partly sourced from other vineyards) and Chamisal’s stainless-steel-fermented and aged Chardonnay.

He’s seeking to add three sales reps to the current seven, and build direct sales to consumers. Martin noted that Seghesio has done very well internationally, and hopes to expand that to the other brands.

Retaining key staff, including management, has been an important goal for both the acquiring parties and the wineries acquired. Seghesio and Baldwin have stayed on after acquisition, but Baldwin admitted, “I’m still there every day, but I don’t worry quite as much when it rains during harvest any more.”