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01.27.2014  
 

B.C. Winery Sales Gather Momentum

CedarCreek Estate Winery to join Von Mandl Family Estates

 
by Peter Mitham
 
 
“cedarcreek”
 
CedarCreek Estate Winery is set to be sold to Von Mandl Family Estates in early February.

Kelowna, B.C.—Consolidation is gaining momentum in British Columbia’s Okanagan Valley, where Von Mandl Family Estates has announced plans to acquire CedarCreek Estate Winery from the Fitzpatrick family.

The deal is set to close in early February, and Von Mandl Family Estates declined comment pending completion of the transaction.

Terms have not been disclosed, although winemaker Darryl Brooker and winery management seems set to remain in place, in keeping with VMFE’s commitment to “separate staffing, management...hallmark and identity” at its properties. CedarCreek founder, Canadian Sen. Ross Fitzpatrick, remarked in a statement announcing the deal that he looks forward “to enjoying many more glasses from our Home Block” following the transaction’s close.

The purchase doesn’t include the Fitzpatrick family’s Greata Ranch property in Peachland, B.C., which the family will continue to operate. CedarCreek was originally established in 1980 as Uniacke Wines. The Fitzpatrick family acquired the winery in 1986.

The deal for CedarCreek follows Groupe Taillan’s acquisition of full ownership in the Osoyoos Larose joint-venture from Constellation Brands Canada at the end of October.

Other transactions in 2013 saw a Calgary buyer acquire the former Hollywood and Wine winery in Summerland, B.C., now Saxon Winery Ltd., while an offshore group is reputed to have purchased the fruit winery Fort Wine Co. in Langley, B.C. Current listings seek buyers for Sonoran Estate Winery in Summerland, Tangled Vines Winery in Okanagan Falls, B.C., Herder Winery & Vineyards in Keremeos, and 40 Knots Estate Winery on Vancouver Island.

All told, nearly 10% of the 229 grape wineries in B.C. could be in play right now, according to industry buzz.

Many observers believe British Columbia is ripe for consolidation as the generation of owners that spearheaded the development of the modern B.C. wine industry following signing of the North American Free Trade Agreement in 1988 hand the reins to a new generation. At the same time, many wineries that started in the past 10 years—there are more than twice as many today as in 2004—need access to capital to continue growing.

This has created opportunities for buyers, according to Rob Ingram of Terrabella Wineries Ltd. in Summerland, which has raised $7.5 million (Canadian) for acquisitions. Terrabella owns Perseus Winery near Penticton and acquired a second property near Kelowna a year ago for vineyard development; the company is working toward a third purchase.

Financing
“The ones that are doing well have to keep increasing their inventories, and the banks aren’t really well known for supporting this industry,” Ingram said in an interview last fall.

While banks will typically extend an operating line of credit to wineries producing more than 5,000 cases—or about $1 million in sales—Ingram estimates that this leaves about 80% of the province’s wineries with less than ideal financing arrangements.

Many opt to borrow against the equity accumulated in their land, which can be quite significant for older property owners that got their start in the late 1980s, when vineyard land could be had for less than $500 per acre.

A decade ago, values were north of $100,000 per acre, and maxed at out between $150,000 and $200,000 per acre before the financial crisis of 2008 and ensuing recession knocked values to $100,000 to $150,000.

A newer vintner that acquired land at the top of the market is less able to finance growth now that values have come down, although Ingram said most aren’t in that position.

“Most of them have a lot of equity in their lands, they’re actually fairly wealthy people,” Ingram said. But “it’s very hard for small wineries to grow without support.”

One big family
Becoming part of a larger corporate entity gives smaller wineries the financial clout they don’t have alone, and in the case of larger wineries—as with the incursion of California wineries in Oregon and Washington state—a chance to diversify their portfolios by picking up unique brands with established reputations.

Von Mandl Family Estates, recently established by proprietor Anthony von Mandl, is overseen by president Rick Bonitati, a former senior vice president at Jackson Family Wines who came to Canada last fall as president of Mission Hill Family Estate.

The new company holds the von Mandl family’s wineries, including its flagship property, Mission Hill Family Estate, as well as CheckMate Artisanal Winery (the former Domaine Combret Estate Winery near Oliver, rechristened Antelope Ridge in 2006 and acquired by the von Mandl family in 2012).

Von Mandl Family Estates gives its purpose as being, “to produce wines that can stand alongside the best in the world.” Sibling organizations include the Artisan Wine Co., which produces a number of brands, and Mark Anthony Brands, a drinks import and distribution company.

 

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