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Santa Rosa’s Vintage Wine Estates to go public in $690M deal

Vintage Wine Estates brands

Girard Winery

Clos Pegase

Swanson Vineyards

B.R. Cohn

Viansa Sonoma

Cameron Hughes

Windsor Vineyards

Laetitia

Layer Cake

Bar Dog

Firesteed Cellars

Cherry Pie

Gaze

Middle Sister Wines

Purple Cowboy

Delectus Winery

Cosentino Winery

Tamarack Cellars

Owen Roe

Qupe

Cartlidge & Browne

Sabotage

Wine Sisterhood

The Splinter Group

Alloy Wine Works

Girl & Dragon

Clayhouse Wines

Buried Cane Wines

If You See Kay

No. 209 Gin

Sonoma Coast Vineyards

Vintage Wine Estates, which has built a portfolio of over 50 wine and spirits brands from the California Wine County and the Pacific Northwest to become one of the largest U.S. wine producers, has inked an agreement with a special-purpose acquisition company to become publicly traded.

The deal between London-based Bespoke Capital Acquisition Corp. and the Santa Rosa-based porfolio that includes brands such as Viansa Sonoma and Napa Valley’s Girard is valued at $690 million plus $50 million in future potential consideration, according to the announcement Thursday.

And just before the merger agreement was signed, Wasatch Global Investors acquired a $28 million stake in Vintage.

“At some point, it takes a lot of capital to be in the wine business, and we needed more capital to continue our growth,” Vintage CEO Pat Roney told the Business Journal.

As part of the deal with Bespoke, Roney would remain CEO in the merged company, which would be called Vintage Wine Estates Inc. Bespoke Executive Chairman Paul Walsh, former CEO of wine and spirits giant Diageo, would become chairman.

“After evaluating over 100 companies, we are delighted to have identified VWE as the ideal merger partner,” Walsh said in the news release. “The Company represents a unique and compelling investment opportunity in the consumer staples space. VWE’s well-diversified portfolio of high-quality brands spanning all price points and differentiated omni-channel marketing approach bring great balance. In addition, the Company has a deeply experienced management team with a strong track record of synergistic deal-making, which, on top of impressive organic growth, should continue and will help drive profitable growth as well as enhance shareholder value over the long term.”

Roney said in the announcement that Vintage is at a positive inflection point in our growth outlook.”

“This transaction will not only enable us to invest behind our brands to drive market share where necessary, but it will also fuel the next phase of our rapid growth in the U.S. wine industry,” he said.

The pending merger is good news for the wine business, according to Robert Nicholson, president of Healdsburg-based International Wine Associates, a marketing and mergers-and-acquisitions firm. He has known Roney since they worked together in the 1970s at a Diageo predecessor company.

“He's going to be in a position to make some important acquisitions,” Nicholson said.

Vintage started two decades ago and now ships the equivalent of nearly 2 million 9-liter cases of wine and spirits annually. Total production capacity is 15 million cases annually, and the company has secured new warehouse and distribution facilities, according to the company.

The vintner-distiller has grown organically and through over 20 acquisitions to have a portfolio that includes brands across the pricing spectrum, from $15 to $150 a bottle. But a majority of the production in the fast-growing $12–$20 range.

Compound annual growth for Vintage since 2010 has been over 20% for revenue and 24% for earnings before interest, taxes, depreciation and amortization, according to an investor presentation about the deal.

Bespoke’s announcement said Vintage has “a well-balanced omni-channel strategy encompassing direct-to-consumer, wholesale and exclusive brands arrangements with national retailers. The result is a stable platform that has thrived even in periods of economic uncertainty.”

The breakdown of Vintage’s sources of net revenue, which topped $200 million as of end of its fiscal year in June, was 38% wholesale, 33% business to business (exclusive brands, custom crush and other services) and 29% direct to consumers, according to the deal presentation to investors.

To have nearly one-third of net revenue from direct sales is remarkable, according to Nicholson.

“That's a very high number for a big company like Pat’s,” he said.

B2B projects include Costco Wholesale, Amazon and national grocers. A high-speed bottling line and fulfillment facility is set to be completed this summer, according to the document.

Vintage operates 19 wine clubs with over 36,000 members. Beyond additional capital, having the potential to convert some company investors into club members also is a plus about going public, Roney said.

The downsides of being publicly owned, he said, include stricter and more costly federal securities regulations as well as more pressure to show long-term earnings growth.

“Whereas in a private company, you could accept what happens with a fire, you can accept what happens with the pandemic,” Roney said. "The public markets, perhaps, are more expensive, and there is a little more volatility with them.“

Vintage Wine Estates brands

Girard Winery

Clos Pegase

Swanson Vineyards

B.R. Cohn

Viansa Sonoma

Cameron Hughes

Windsor Vineyards

Laetitia

Layer Cake

Bar Dog

Firesteed Cellars

Cherry Pie

Gaze

Middle Sister Wines

Purple Cowboy

Delectus Winery

Cosentino Winery

Tamarack Cellars

Owen Roe

Qupe

Cartlidge & Browne

Sabotage

Wine Sisterhood

The Splinter Group

Alloy Wine Works

Girl & Dragon

Clayhouse Wines

Buried Cane Wines

If You See Kay

No. 209 Gin

Sonoma Coast Vineyards

What’s now called Vintage Wine Estates started taking shape in 2007 when Roney, former CEO of specialty grocery chain Dean & DeLuca and proprietor, teamed with the late vintner and beverage entrepreneur Leslie Rudd to buy Windsor Vineyards from Foster’s Group. Roney had purchased Napa Valley winery Girard in 2000. Roney led Rudd’s string of acquisitions over the years along the California coast and in the Pacific Northwest.

Special-purpose acquisition companies, or SPACs, are formed to provide a faster and less expensive route for a private company to go public. In a SPAC merger, the company files for an initial public offering, and then later it merges with a target company that then becomes the listed entity.

“I'm not quite sure, frankly, how many people can pull this off in the wine business,” Nicholson said. “Pat has a base business which is substantial enough to be able to do this.”

Roney said Vintage had considered its own initial public offering versus a SPAC merger, and had talked to other such companies about the process. Bespoke seemed to be the right choice because of who is at the helm, he said.

Walsh retired in 2013 from United Kingdom-based Diageo after 13 years as CEO. He is credited with growing that drinks company’s market capitalization by $80 billion in that time.

Other new directors for the merged Vintage board of directors would be Bespoke partners Rob Berner and Mark Harm. The latter just rose to CEO after the departure of Peter Caldini, who resigned to become CEO of cannabis company Acreage Holdings. Roney noted that Berner and Harm know the wine business through investments in Vinventions, which owns Nomacorc and other cork and closure brands.

“We're committed to Santa Rosa and Sonoma (County) — being part of this community — and we're excited about our growth opportunities,” Roney said.

Bespoke was formed in 2019, and the merger agreement with Vintage extends its deadline to close a deal with an acquisition target to May 15, according to the announcement.

Bespoke is currently listed on the Toronto Stock Exchange under the ticker symbols BC.U and BC.WT.U and on Pink Open Market as BKCQ.F. Shares started trading in March 2020. It is pursuing a listing on the Nasdaq exchange.

The merger agreement calls for Vintage capital stockholders, excluding dissenting shareholders and certain stock classes, to receive $10 (CA$12.83) a share of Bespoke stock. The class A restricted stock was trading Thursday morning at CA$10.11 a share ($7.88), down 1.8% from Wednesday.

Certain Vintage minority shareholders and those involved in its stock-incentive plan would receive roughly $41 million.

Bespoke is incorporated in British Columbia, Canada. The merged Vintage Wine Estates would become incorporated in Nevada.

Canaccord Genuity and Citi are Bespoke’s capital markets advisors and Citi and XMS Capital Partners are its financial advisers. Cowen is lead financial adviser and sole capital markets adviser for Vintage and was sole placement agent for the Wasatch deal. Jones Day and Blake Cassels & Graydon are are Bespoke’s legal advisers, and Foley & Lardner and Stikeman Elliott are advising Vintage.

Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at jquackenbush@busjrnl.com or 707-521-4256.

Corrections: Bespoke Capital Acquisition Corp. is headquartered in London and incorporated in British Columbia, Canada. Vintage Wine Estates produces over 50 brands.

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