Sebastiani Vineyards to Sell Main Division to Wine Group

Continuing the consolidation in the California wine business, Sebastiani Vineyards Inc. has agreed to sell its main winemaking division and marketing arm to Wine Group Inc. to raise funds for the expansion of its luxury wines unit. Terms of the transaction weren’t disclosed, but sources close to the deal estimate the price at $300 million to $350 million.

The sale includes its Turner Road Vintners division, which produces the Vendange, Talus, Nathanson Creek, Farallon, Heritage and La Terre brands, and the two wineries that produce these wines. It also includes its sales arm, Humphrey & Brown International Wine Marketers, and a distribution center near Woodbridge, Calif.

The deal gives Wine Group, a San Francisco-based producer of less-expensive table and box wines such as Franzia, Corbett Canyon and Foxhorn, entree to the rapidly growing, higher-margin premium wine market.

Sonoma-based Sebastiani sold 7.9 million cases of wine in its 2000 fiscal year ended June 30, of which Turner produced about 7.8 million cases, the company said.

Despite its scale, company officials say they lacked the funding necessary to effectively market its brands.

“We, as a family-owned winery, increasingly faced the challenge of heavily funded competitors in a highly competitive environment,” said Richard A. Cuneo, Sebastiani president. “For the long-term health of the company we considered a range of strategies, from alternative financing to a public equity offering” before agreeing to an acquisition.

Sebastiani Vineyards was founded by Samuele Sebastiani in 1904 and is still run by the Sebastiani family, including some fourth-generation members. The company will now focus on its Sebastiani Wines division, which makes craft wines that retail for $16 to $70 a bottle.