CANADIANS COURT WINERY : Clos du Bois Reportedly Sold to Hiram Walker
Hiram Walker of Canada has agreed to buy Clos du Bois, a California wine operation, in one of the largest winery acquisitions in state history, for about $40 million, according to a source close to the negotiations.
The sale is further proof of the attractiveness of California’s premium wine industry to foreign companies, which own an estimated 40 of the state’s 750 wineries.
Details of the sale were not revealed Monday, but the source said Hiram Walker, subsidiary of British conglomerate Allied Lyons PLC, “paid in the neighborhood of $40 million” for all the assets of River Oaks Agricorp, which was doing business as Clos du Bois.
The previous high price paid for a California winery was believed to be the 1984 sale of Chateau St. Jean in the Sonoma Valley to Suntory of Japan. No price was ever announced for that deal, but it was widely reported as about $40 million.
The source added that Suntory was one of two Japanese companies that also showed strong interest in Clos du Bois, and “both of them have their eyes on other premium properties.”
Value of Brand ‘Pretty High’
Ian Wilson-Smith, a vice president with Hiram Walker who was in San Francisco last Friday for a wine industry symposium, declined to comment on persistent rumors of the sale. Frank M. Woods, president of Clos du Bois and a partner in the property, confirmed that he was negotiating with Hiram Walker.
A source close to the negotiations said boards of both companies had approved the deal, which was handled by Hambrecht & Quist, a San Francisco investment banking company. Papers finalizing the deal are to be signed today.
Included in the sale were 540 acres of prime vineyard land in Sonoma County as well as Clos du Bois’ second label, River Oaks. Clos du Bois also has long-term leases to buy additional Sonoma County grapes. Unlike Chateau St. Jean, however, Clos du Bois owns no winery; it makes its wines in a leased facility in Healdsburg.
“The vineyard land is worth between $10 million and $12 million by itself, so that makes the value of the brand pretty high,” the source said. “These days, that’s the name of the game: brand strength.”
Woods said the issue of whether he will remain with the operation is still to be resolved.
Last year, Clos du Bois produced 204,000 cases of wine. Woods had plans to push production to twice that figure, but he needed a larger winery and more funds for promotion and marketing. In an interview in March, he said he was seeking financing for such a plan.
On Monday, Woods said such financing hasn’t been easy to obtain.
“The banks are willing to consider providing you with operating capital that would be paid back over a short period,” he said. “But they’re not willing to consider long-term investment. We were looking at doubling our size, and that would require a minimum of $20 million.”
He added that “Hiram Walker has given us assurances that they consider the pattern that has gotten us to this point well worth the investment.”
The Clos du Bois deal was attractive because of the strength of the brand in the national market as well as the high quality of the vineyard land, according to Jon Fredrikson, president of Gomberg Fredrikson, an industry consulting firm in San Francisco.
“Those vineyards are amazing, and they are highly unusual in the industry,” said Fredrikson. “You could say they are high tech. They have done things that are years ahead of the field in boosting yields and improving quality at the same time. You have to credit Hughes Ryan (Clos du Bois’ vineyard manager) with doing marvelous work.”
One complication in the protracted negotiations between Clos du Bois and the three bidders was that Thomas C. Reed, principal shareholder and chairman of Clos du Bois and a Healdsburg developer, wanted to sell but Woods didn’t, a number of sources said.
The sources said that until very recently, Woods was meeting with potential investors, hoping to come up with an alternative to the sale.
About 75% of Hiram Walker’s profits come from five liquor brands: Canadian Club, Courvoissier, Ballantine’s, Tia Maria and Kahlua. Allied Lyons, which acquired Hiram Walker 18 months ago, also markets Teacher’s Scotch and the wines and other beverages of Harvey’s of Bristol. Six weeks ago, Allied formed a new unit to manage all of the company’s wine operations, to be called Hiram Walker Allied Vintners.
Clos du Bois is the industry’s largest producer of Merlot (more than 60,000 cases last year), and about half of the company’s production is in Chardonnay, the most expensive California varietal wine.