News Column

Private equity firm boosts offer for Beringer Vineyard's parent company

August 5, 2014

By Bill Swindell, The Press Democrat, Santa Rosa, Calif.



Aug. 05--A possible private equity takeover of the parent company of Beringer Vineyards may help breathe new life into the historic St. Helena winery that has faced a challenging marketplace under rocky leadership, analysts said on Monday.

Speculation on a possible sale increased Monday after Treasury Wine Estates announced that it received a revised offer of $5.20 (Australian) per share from Kohlberg Kravis Roberts (KKR) & Co. and Rh"ne Capital. The bid represented an 11 percent increase over an earlier offer that KKR made in April, which was rejected by Treasury Wine. The Australian company said it would negotiate further and allow the New York firms to conduct non-exclusive due diligence.

A sale would have major ramifications in the North Coast wine industry as Treasury Wine owns Beringer as well as other wineries such as Cellar No. 8, Chateau St. Jean and Souverain in Sonoma County, and Stags' Leap Winery, St. Clement and Sledgehammer in Napa County.

The company's stock since the beginning of the year had been struggling -- as low as $3.43 (Australian) in February -- until it received the initial KKR takeover bid. That had followed the September ouster of CEO David Dearie after he decided to destroy about $33 million in unsold wine that was past its prime.

A sale could be beneficial to the local wine industry, especially with a new owner that would have a fresh eyes to re-examine the business, said Joe Ciatti, a partner at Zepponi & Co.

"In all honesty, they have struggled," Ciatti said of Treasury Wine's efforts. "Right now if you are a grower for them or an employee you have some question marks."

The company has lost some key local personnel. For example, Michael Kluczko, a Treasury Wine senior vice president for regional supply, left in November and in March joined the Wagner Family Wines, according to his LinkedIn account.

The sale would carry some attractive high-end labels such as Chateau St. Jean and St. Clement. But it also comes with a bigger question mark of Beringer, which has increased its share in the very competitive $10 per-bottle market range with its Classic line.

Rob McMillan, founder of Silicon Valley Bank's wine division, said that Treasury Wine's struggles prove that the wine industry is not suited for Wall Street's emphasis on quarterly growth. "At best, it's annual business. It's not a quarterly business," McMillan said.

Private-equity control would allow sufficient time to map out a long-term strategy, he said. "It's kind of worse than a startup in a lot of ways . . . you got to repair things that are broken," McMillan said. "It's going to take a lot of capital."

You can reach Staff Writer Bill Swindell at 521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.

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(c)2014 The Press Democrat (Santa Rosa, Calif.)

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Source: Press Democrat, The (Santa Rosa, CA)


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