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Marin equity fund to invest $250 million in wineries, vineyards as ownership shifts

SAN ANSELMO – A group of wine industry veterans has launched a $250 million private-equity fund devoted exclusively to wineries and vineyards. The fund plans to acquire controlling interests in seven to 10 wine companies, increase profits and then sell the companies or take them public.

Vinum hopes to take advantage of the growing number of wine companies that will change hands as their founders and owners retire, according to Stephen Kuhn, the general manager for San Anselmo-based Vinum Capital Management LLC, a new company formed to manage the fund.

“What we see right now is that there is an enormous consolidation that is about to occur in the industry,” Mr. Kuhn said. “There are many properties that are going to come on the market in the next five years.”

Mr. Kuhn cited a survey by Silicon Valley Bank and Napa-based Scion Advisors showing that 51 percent of family-owned wineries will change hands within 10 years.

“We believe that with the high percentage – 80 percent – of California wineries being owned by first generation or founders and the fact that many of these properties have been in business 20, 30, 40 years or more, there is going to be a significant demand for equity capital for liquidating their interest in their property,” Mr. Kuhn said.

Vinum’s founding investors and managers come mostly from the wine industry. Its investment partners include Justin Faggioli, former chief operating officer for Ravenswood and Scott Setrakian, a former director of Golden State Vineyards. The management team includes Bill Foster and Bob Steinhauer, both former Beringer executives; Johathan Pey, owner of Pey-Marin Vineyards and a former employee for Robert Mondavi and Fosters Wine Estates; and Doug Rogers, formerly of Gallo, Southcorp and Brown-Forman Wines.

Mr. Kuhn said the fund, Vinum Capital Partners I LP, will use its in-house wine expertise to grow the brands that it acquires, but it is open to working with existing winery management.

“We are really focused on quality wines and brands, and maintaining and increasing the quality,” Mr. Kuhn said. “This is not a slash-and-burn, break-it-up private- equity fund.”

The fund will focus on high-end wine producers on the West Coast making between 20,000 and 150,000 cases per year and plans to hold each company for six to eight years, Mr. Kuhn said.

Mr. Kuhn did not disclose the amount of money Vinum has raised so far. It expects to reach its goal of $250 million in four years, he said.

“We expect that high-net-worth individuals, family offices, pension funds, institutional investors and universities and endowments would be potential investors in the fund,” he said. The minimum investment is $250,000 for individuals and $5 million for institutions.

Vinum Capital Management plans to raise additional money to launch more funds that will use the same strategy for wineries outside of the West Coast, including wineries abroad, Mr. Kuhn said.

“We do see Italy, France and South America, as well as potentially Australia, as future markets,” he said. “We have already received solicitation from outside the country for equity capital.”

Prior to launching Vinum, Mr. Kuhn worked in corporate development and mergers and acquisitions, with a focus on the technology industry. In 2005, he started Reverbix, a San Rafael-based company that makes Web-enabled phone messaging systems. He sold that company last fall.