Investors to Cork Deal for Another Wine Property in State

Two investment groups that paid an estimated $350 million last year for Nestle’s prestigious California wine properties said Monday that they have agreed to buy a Japanese-owned Sonoma County winery renowned for its chardonnays.

Texas Pacific Group, with offices in San Francisco and Fort Worth, and Silverado Partners, based in the Northern California wine country, reportedly will pay between $30 million and $35 million for Chateau St. Jean Vineyards and Winery, headquartered in a chateau-style building in the town of Kenwood.

The seller is Japan’s Suntory International, a big wine and spirits company, which paid $40 million for the operation in 1984 when it was significantly smaller.

Chateau St. Jean (pronounced the American way, to rhyme with “gene”), founded in 1973, has annual sales of more than $20 million and produces about 240,000 cases, up from about 180,000 cases in the mid-1980s. It is primarily known for chardonnays, but its fume blancs, Rieslings and dessert wines are also “classy wines,” according to James Laube, an editor with the Wine Spectator magazine.

The deal would include more than 200 acres of premier vineyards that Chateau St. Jean owns or leases in the Sonoma, Alexander and Russian River valleys.

Sales of California premium table wines, particularly those made in the Napa Valley and Sonoma County, have perked up recently after several difficult years. Sales of such higher-priced wines rose 15% last year, whereas overall sales of California table wines grew 5%.

Wine country observers speculated that the investors apparently saw an opportunity to fill in white wines missing from the line acquired with Nestle’s Wine World Estates, which includes Beringer Vineyards, Meridian Vineyards and other properties known primarily for red varieties. However, the buyers said the winery had recently gained recognition for its reds--Cabernet Sauvignons and Merlots.

Their flurry of acquisitions notwithstanding, Texas Pacific and Silverado are too savvy to scoop up properties willy-nilly, one industry consultant said.

“I don’t think these people are going to take over the world,” said Kathy O’Dowd, a partner in the Napa Valley consulting firm of Motto, Kryla & Fisher. “They know they can only manage so much profitably.”

For Suntory, the sale illustrates efforts to refocus after purchases of a minor league baseball team, restaurants and Chateau St. Jean. The company recently paid $300 million for a Chicago-based bottled-water company that makes it the nation’s No. 2 water distributor, after France’s Perrier Group. Suntory also owns a distillery in Southern California that produces brandy for export to Japan.

The principals of Texas Pacific include David Bonderman and James G. Coulter, both former associates of the billionaire Bass family in Fort Worth. Another is William S. Price, a former senior executive with GE Capital Corp. Their firm also has holdings in Continental and America West airlines, among other companies.

Silverado Partners, a limited partner in the deal, buys wine properties and advises third parties on such purchases. Its principals are E. Michael “Mike” Moone, C. Richard Lemon, David I. Freed and George A. Vare.

Chateau St. Jean was founded by Robert and Edward Merzoian and Ken Sheffield, Central Valley table grape growers. It quickly acquired a reputation for producing elite wines and, Laube said, “captured the imagination of the white wine boom of the ‘70s.”