11.29.2017  
 

Arterra Buys Laughing Stock Vineyards

Winery founders at crossroads ink share-purchase agreement in British Columbia

 
by Peter Mitham
 
wine winery laughing stock vineyard sale
 
David and Cynthia Enns, founders of Laughing Stock Vineyards, are transferring ownership of the property to Arterra Wines.

Penticton, B.C.—Laughing Stock Vineyards on the Naramata Bench will join Arterra Wines Canada Inc. in Arterra’s first deal since Ontario Teachers’ Pension Plan (OTPP) acquired Constellation Brands Canada’s winemaking operations in $1 billion deal (CAD) one year ago. 

“With our new ownership, we’re quite focussed on building a strong future for Canadian wines and premiumizing our business,” Jay Wright, president and CEO of Arterra, told Wines & Vines. “The opportunity to acquire Laughing Stock Vineyards was very serendipitous.”

Laughing Stock is a venture of David and Cynthia Enns, who left careers in the financial world and purchased a vineyard on the Naramata Bench in the southern Okanagan Valley in spring 2003. It produces slightly less than 10,000 cases of wine today from 40 acres of owned and leased vineyard. The winery’s flagship is Portfolio, a Bordeaux-style red blend that sold out in five weeks this fall.

“Portfolio is probably Canada’s top Bordeaux blend, red wine,” Wright said. “The opportunity to partner with entrepreneurs who have a vision for making the best wine in Canada is something we couldn’t turn down.”

The opportunity to take on partners wasn’t something the Enns could afford to pass up, either.

David Enns said the winery was “highly profitable,” but it had reached a crossroads. Growth during the past 15 years had pushed the winery to capacity, and he had just turned 60 (Cynthia is 48). With ongoing demand for Laughing Stock wines and an evolving landscape for wine sales, something had to give.

“There’s a lot of heavy lifting every year. So how could we continue, how could we extend the brand and the business without killing ourselves doing it? We’re at capacity,” he said. “Now we’re in a way better position.”

Doing the deal
What to do next had been on the Enns’ minds for a year before they approached accounting firm Deloitte to size up Laughing Stock’s options.

“We hired Deloitte to find out what the marketplace was like, right at about the same time the Black Hills deal was coming around,” David Enns explained.

The aim was for a discreet, targeted process that identified about 20 candidates and then a bid process that saw submissions from seven interested parties including investors from Asia to Alberta as well as larger wineries that could provide ongoing support.

“We had to look at where is our success story going to happen in this?” Enns said. “We went with Arterra because of the immediate connection. The energy and the chemistry was good. They are in a development stage, and they’ve been in the valley for 30 years.”

The final transaction came together at an early morning meeting at the end of July, where the Enns as well as Wright and Arterra director of winemaking Paul Kassebaum sat down to taste through Laughing Stock’s wines. The result was a share purchase agreement that will see Laughing Stock continue operating as a wholly owned subsidiary of Arterra under the Enns’ management.

Andrew Peller Ltd. paid $31 million earlier this year for Black Hills Estate Winery, which at 15,000 cases is slightly larger than Laughing Stock, but neither Wright nor Enns would disclose the price for Laughing Stock.

The deal, set to close Dec. 1, allows the Enns to make good on their investment—making the venture far from a laughing stock for the couple.

“I’m happy as a clam to have a partnership with Arterra, so Cynthia and I can continue to steward this project that we started 15 years ago and have the resources to fulfil what its destiny should be,” Enns said.

Laughing Stock will maintain much of its independence as part of Arterra, which will largely provide administrative support. Growth plans, Wright said, is “really going to be up to them.”

“It’s business as usual for us,” he said. “We’re going to help them around the administrative hassles of business and allow them to focus on what they do best, which is make great wines.”

No other deals
Wright said Arterra is not scouting other properties, preferring instead to focus on its existing portfolio. This is something it’s done in the year since the OTPP acquisition. Arterra has definitively mothballed Le Clos Jordanne, originally a joint venture between its predecessor Vincor International Inc. and the Boisset family of France. Le Clos Jordanne, launched in 2002 with visions of a Frank Gehry-designed winery, made acclaimed Burgundian varietal wines under winemaker Thomas Bachelder, but the vision faded after Constellation’s acquisition of Vincor in 2006. The brand’s demise hit the news in spring 2016, and while ownership of the brand and premises remain with Arterra, no new venture is planned for the lakefront facility near Jordan, Ontario.

“We closed down over the past year,” Wright said.

In 2013, while still part of Constellation, Arterra sold its interest in Osoyoos LaRose to Groupe Taillan, formerly a partner in the joint-venture, and in 2012, Black Sage Vineyards was hived off from Sumac Ridge with a focus on red varietals.

Laughing Stock represents a fresh investment in estate wineries, and a renewed focus for the company, which will now have seven estate wine brands in British Columbia including Sumac Ridge, Black Sage Vineyards, See Ya Later Ranch and Nk’Mip Cellars (a joint venture with the Osoyoos Indian Band). Two other brands, Jackson-Triggs and Inniskillin, each operate estate wineries in both British Columbia and Ontario, Canada.

Arterra, based in Mississauga, Ontario, also operates commercial wineries in Rougemont, Quebec; Niagara Falls, Ontario; and Oliver, B.C. In addition, it is the distributor for Constellation’s wines in Canada as well as owning and operating 164 Wine Rack retail wine stores in Ontario and the RJS Craft Winemaking brand, which sells wine kits and products to home winemakers.

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