More breaking news from Piemonte...

Well this is just too much of a coincidence… here I am in More e Macine and the same source that told me about the Vietti sale nearly a year ago to the day tells me that the same buyer snapped up Bruno Giacosa today.

Things sure are a changin in the Langhe…

Ken is going to be PISSED!

I know Ken visited Bruno last year (great read here on Ken’s blog - Visit to the Giacosa Winery, Neive, Piedmont, 7/6/2016)

Sounded like Bruno was at the point in his life where perhaps it made sense to sell? Also, it would help the family take care of him, I’d think.

who is this buyer, George?

Kyle Krause, heir to the Kum & Go supermarket chain:

http://www.vinialsupermercato.it/colpo-grosso-nelle-langhe-krause-su-giacosa-rumors-touchdown/

A couple of key parts of that story via Google Translate:

Iowa’s Krause Holdings Inc. group, … according to rumors gathered by wines-super [??], would have finalized the acquisition of Bruno Giacosa for about 100 million euros in recent days.

… If the news of Bruno Giacosa’s purchase was confirmed it would reach sixty hectares of group ownership. It is possible that the Holding will reach 100 hectares of Barolo, according to other rumors Krause would be “courting” other companies, including Rocche dei Manzoni, to whom a nine-figure bid would be made.

Very interesting news.

At current production levels, I wonder how long it will take to recoup 100 million euros.

A good question. I suppose the premise could be like what we speculated about Constellation buying Schrader: If you can take your existing vineyards (in this case pre-Vietti properties) purchased at modest prices and market wine from them under a premium brand’s name, you can generate a decent return on your overall investment. In other words, the investment in the Vietti and Giacosa brands would be evaluated along with the earlier land purchases. But this is speculation on my part.

It’s still hard to see how you get to 100 million euros. In a routine business, to have a valuation like that, you’d need cash flow on the order of 10 million euros or so (i.e., a 10x Ebitda multiple). I’d be surprised if the cash flow is anything like that.

Heard the rumor of the deal twice last week in Piemonte … wonder what this will mean for the wines from Giacosa going forward. Surely the times a changing in Langhe …

And 10x would also be a fairly high multiple.

Yes, generous, although not crazy in the current market for a unique brand.

Interesting but I have never purchased a Giacosa wine and if Vietti became Barefooot my life would not change. However (said in my most Steven A Smith voice) I can see how the rising tide raises all ships.

The motivation for these purchases is interesting to speculate on.

I really don’t see it as a simple ‘monetisation of the brands’ with subsequent dumbing down. Easier to do that with bigger operations further down the chain.

Whereas the purchase of Giacosa alone might have been someone stepping in to secure the future of a beloved winery, that doesn’t tie up with the purchase of Vietti, who appear to have been made an uninvited offer they couldn’t refuse.

It could be someone seeing a region with the potential for stratospheric pricing, and wanting to get in whilst there was still value to be had, and by going in big, confident that those purchases alone will add fuel to wine and land price inflation. A possibility.

How about an ego trip, wanting to buy the most prestigious wineries they can get hold of? Also a possibility.

This seems the most likely answer. Combined with a cash-rich investor in a low interest rate environment, with an interest/appetite for wine.

I’m sure someone can build up the math a lot better than me, but I saw that Giacosa owns 17 hectares of vineyards. Supposedly current pricing is ~ 1M Euro per hectare - and I’m sure that’s not for Giacosa level quality. Not sure what buildings and other real estate transfer as well.

On the wine side, I assume that all the vintages currently in the cellar would transfer in the sale. I would think in the case of Giacosa this stock could easily be 10M Euros per Vintage and possibly more. Figure 3 vintages in cellar, so another 30M Euro or so.

Basically if any of the above is remotely accurate, figure 50% of the price is tangible assets alone

Good point about the inventory.

The winery building is on the main street in the lower part of Neive. And, at least when I visited 20 years ago, was completely utilitarian. I doubt that’s worth much.

And how many Riservas from old vintages are slumbering in the cellar? What are they worth?

OK.

Never mind.

[oops.gif]