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12.22.2008  
 

Foley Scoops Up Sebastiani

Century-old Sonoma family winery is reportedly sold to aggressive Central Coast group

 
by Jane Firstenfeld
 
 
Sebastiani Vineyards
 
Sebastiani's new tasting room revamped the original winery built in 1903.
 
Sonoma, Calif. -- Sebastiani Vineyards & Winery, a four-generation family operation since its founding in 1904 by Italian immigrant Samuele Sebastiani, has reportedly been sold to Foley Wine Group, a Santa Barbara County-based company that has gobbled up numerous high-end wineries in the past two years. (Read Wines & Vines article).

Bill Foley
 
Bill Foley is reportedly adding Sebastiani to his collection of high-end winery properties.
Two local newspapers reported the acquisition over the weekend, following an announcement to Sebastiani employees late last Friday. Calls to Sebastiani were not returned prior to deadline, but the company issued a news release today, confirming the transaction. William "Bill" Foley II, is quoted: "Sebastiani's well-known brand, diverse family of wines and new, state of the art facilities offer significant capacity for future growth…We believe Sebastiani is an extremely valuable addition to our current portfolio." Foley retired in 2007 as CEO of Fidelity National Financial, Inc. (FNF), a publicly traded Fortune 500 company, and embarked on a buying spree that included Firestone Vineyards in Santa Barbara and San Luis Obispo counties, Merus in Napa Valley and Three Rivers in Washington state.

Sebastiani, which became one of Sonoma's most recognizable brands during the 1970s, making mostly jug wines under the guidance of Samuele's son August, has in recent years downsized to emphasize high-quality varietals, mostly grown in Sonoma County.

Following August's death in 1980, his widow Sylvia took the reins, appointing the couple's elder son Sam to run the winery. The matriarch fired Sam in 1986 in a disagreement over growth and direction, and replaced him with his younger brother Don. Under Don the winery reversed Sam's downsizing strategy and again built up volume and created new brands. The family eventually sold off its Turner Road Vintners in the Central Valley in 2000 to concentrate on high-end Sonoma-produced wines. In 2001, Don left to establish a company with his own sons Donny and August. Don Sebastiani & Sons is largely a negociant operation producing offbeat brands including Plungerhead, Hey Mambo, Screw Kappa Napa, and the hugely popular Smoking Loon and Pepperwood Grove.

Sam and his then-wife Vicki, meanwhile, founded Viansa Winery in Sonoma Valley, then sold it in 2005 to an investment group for a reported $31 million. Sylvia Sebastiani died in 2003.

Mary Ann
 
Mary Ann Sebastiani Cuneo was the third of Sebastiani's third generation to lead the family winery.
Following the departure of Don Sebastiani from active participation in the family winery, his sister Mary Ann Sebastiani Cuneo became president and chief executive officer; her husband, Richard Cuneo, was named chairman of the board. Their son Marc S. Cuneo is in charge of grower relations. The family recently completed construction of a new winery and hospitality center, while renovating the historic winery in the town of Sonoma that was built in 1903.

"Since 2000, management has refocused the brand through an unwavering commitment to production of wines of quality and value," Mary Ann Cuneo stated. "We are confident that this transaction will strengthen Sebastiani's leading reputation…and continue the Sebastiani heritage of consistent quality and value."

Coincidentally, Don Sebastiani had spoken with Wines & Vines only a day before the news leaked. Although he did not talk of the sale, he mentioned that he had retained part-ownership of Sebastiani Vineyards since leaving the company, and described himself as a "passive investor" in the family winery, which he characterized as a medium sized "appellation winery." Looking back at business during the current year, he said, "I think they're somewhere around flat, maybe down, but profitable." He added that the current wine economy is unlike any he's seen. "I don't think it's been like this for 35 years."

According to Don Sebastiani, in 1966 his father made only about 15,000 cases of wine; by 1970, the total was up to 120,000. By 1973 it had soared to 300,000 cases per year; 500,000 the next year and by 1975 production had grown to more than 1 million cases annually, mostly in jug or magnum bottles. His current company produces in excess of 1 million cases per year of its various brands. Most are negociant wines, although "We did make about half a million cases last year from the ground up," he said. He foresees a day when his brands' $10 and under offerings will be exclusively sourced from negociants, "But it's likely that a greater percentage of our high-end products will be from the ground up, even if it's fewer cases."

High-level executives at Foley confirmed to Wines & Vines that a deal is on the table, but declined to comment further, saying an official announcement will be forthcoming within the next week. Given the recent history of high profile winery sales (read: Chateau Montelena), it's perhaps wisest not to count this a done deal until the actual keys change hands. In the interim, however, we can report with confidence that the Foley Group has acquired a new president. Tim Matz, previously with Brown-Forman, Beringer Blass and Kendall-Jackson, and most recently president of Lake County's Langtry Estate and Vineyards, joined Foley just last week.

Industry insider Deborah Steinthal, founding partner of Sci on Advisors in Napa, told Wines & Vines, "I'm hoping we see more of this," referring to Foley's wine industry credibility (he purchased his first Central Coast wine property in 1996 and later bought Lincourt there as well). "Often, outsiders--private equity companies from outside--have unrealistic expectations," she said.

Steinthal praised the Sebastiani family for its foresight in developing an exit strategy. Indeed, a paper she prepared with Rob McMillan of Sillicon Valley Bank and released last January, "Ownership Transitions in the Wine Industry: Obstacles and Strategies for Success," (read it here), deals with just such issues. The authors selected a list of about 100 family-owned or closely held West Coast wineries that had both strong market presence, business infrastructure, multiple sources of distribution and positive cash flow, and estimated that within 10 years, the majority would change hands. Selling to someone who knows the business is, she suggested, the soundest way to preserve a brand, if family succession is not practical.

"I hope it goes through," Steinthal said of the Sebastiani sale to Foley. "Our industry needs to see positive transitions. We have such little practice on this phase. We're so young as an industry. When a deal like like this doesn't go through, it is discouraging."
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