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Vinum Capital Shops for Wineries

Firm launches $250-million fund to acquire family properties

by Paul Franson
winery liquidity Thomas Thornhill
Thomas Thornhill
San Anselmo, Calif. -- Equity fund manager Vinum Capital Management LLC has formed Vinum Capital Partners I LP , a $250-million private equity fund, and is raising money and considering investments. The Marin County-based fund will focus solely on acquiring and operating mid-size premium and super-premium wine properties producing between 20,000 and 150,000 cases annually.

Stephen Kuhn, the general manager and managing partner of the fund, says it is looking for wineries in California's North Coast and Central Coast regions with good brands but inadequate capital, expertise or interest in the business. It is also looking at Oregon and Washington wine properties.

Managing partner Thomas Thornhill, who is also chairman of the Mendocino Wine Company and a former partner at Montgomery Securities, added, "The focus of this fund is to acquire wine properties efficiently, grow them effectively with expertise and necessary growth capital, and ultimately sell them to strategic and financial acquirers."

"Our objective is to help provide liquidity for family-owned businesses. Many of them have been in business 20 to 40 years and there may not be a second generation able or willing to take on the business."

The group held a seminar last week to discuss succession and related issues with Silicon Valley Bank, a major bank for premium small- and moderate-sized wineries. A recent study by Silicon Valley Bank and Scion Advisors indicated that a large portion of California's wineries will change ownership within 10 years.

Kuhn says, "There are 5,000 wineries in the United States, and 96 percent of them produce fewer than 300,000 cases per year, the threshold of interest for large wine companies looking for strategic investments. For these wineries, there are few sources of equity capital."

At least two real estate investment trusts (REITs) also have been investing in vineyards and wineries, but one, Vintage Wine Trust Inc., which focuses exclusively on the wine and vineyard industry, announced in March that it has suspended its acquisitions. It has previously said that it was seeking "strategic alternatives," presumably sales or acquisition.

Also recently, Premier Pacific Vineyards secured a $50 million equity capital commitment from Wilton, Conn.,-based endowment advisor Commonfund Realty, which manages money for about 1,700 foundations and endowments.

Kuhn at Vinum Capital says the new fund is raising money from high net worth individuals, family trusts and institutions. He admits that it can be a challenge raising money in today's economic climate, but points out that this investment features hard assets and demonstrable cash flow.

Managers of the fund have experience in winery operations, vineyard management, financial management and M&A transactions. The team consists of wine professionals whose experience includes brand management, sales, distribution and winemaking at over 40 wineries encompassing over 150 brands, including Mondavi, Gallo, Beringer, Ravenswood and Schramsberg; and investment professionals who collectively have bought, sold, managed or brokered over $1 billion in winery transactions.

The firms' investment partners include: Justin Faggioli, formerly COO of Ravenswood; Scott Setrakian, formerly Director of Golden State Vineyards; and G. Craig Vachon, a financing and M&A expert.

The fund's portfolio management team includes: Bill Foster, formerly from Beringer; Jonathan Pey, formerly from Robert Mondavi and Fosters Wine Estates; Doug Rogers, formerly from Gallo, Southcorp, and Brown-Forman Wines; and Bob Steinhauer, formerly from Beringer and a leading viticulture expert.

Strategic Advisors include Don Brain with VinREIT and Global Wine Partners; and Tom Hakel, formerly with Stag's Leap Wine Cellars.

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