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Plenty to Consider with the Montelena Non-Sale

Photo by: Greg Gorman

Posted: Nov 5, 2008 6:04pm ET

Four months ago we were told that Jim Barrett wanted to sell Chateau Montelena and we assumed there was a buyer. But now Barrett apparently can't sell it at the original terms or doesn't want to sell it at all.

Barrett had shopped the winery around for months and then accepted an offer so sell his Napa winery in July. But the deal fell through last week amidst the global credit crunch. The intended sale to French businessman Michel Reybier ended without the financing necessary to acquire the Napa Valley winery. This may be just the tip of the iceberg for many wineries seeking loans to finance or extend their businesses.

The press release made it seem like the Barretts suddenly realized their property’s value rather than expressing disappointment that the sale collapsed. "We find ourselves energized by the enthusiasm and vision expressed by all the parties who bid for ownership of Chateau Montelena," the statement read.

It now appears that Barrett’s son, master winemaker Bo Barrett, has had his role at the winery redefined. He will now continue as a limited partner, "contributing his experience and expertise as technical advisor and to special projects," according to a press release, leaving Cameron Parry and vineyard manager Dave Vella to oversee production. Parry and Vella may have in fact been winemakers in recent years. But this is the first time the winery has said as much.

We assumed that Reybier’s new team was already in place and ready to make what it said were significant changes to the winery. Now we’ll see if the Barretts think changes need to be made, or it's status quo at the famed Napa winery.

Plenty to consider given the magnitude of the deal that was and now isn’t.

Sam Chen
The Golden State —  November 6, 2008 12:07pm ET
Hi Jim,I am not surprised at the non-sale but I am amazed that the speed in which the credit turmoil is spreading to the wine market. IMHO, the financial model that Reybier ran to purchase Montelena in the first place is no longer valid under the current market condition. If you factor the escalating cost of financing this deal, providing if there are investment bankers out there who are still willing to lend the money, the cost of the necessary upgrade needed to spend to improve the winery, and the loss of favorable exchange rate, the deal just doesn't make financial sense. Now that Montelena is no longer for sale, the question remaining is how will they get the money necessary for the upgrade. If their book is solid, they may sell a minority stake to raise the capital for improvement.
Dennis D Bishop
Shelby Twp., MI, USA —  November 6, 2008 2:03pm ET
It is sad to see such a great historical winery in such turmoil. However, no matter what happens, the land will live on, and that is something to be thankful for.Db
John Osgood
New York, NY —  November 6, 2008 3:08pm ET
Anyone have any intelligence on the terms of the financing? Who agreed to finance this transaction in the first place?
Matthew Weiler
Los Angeles, CA —  November 6, 2008 6:12pm ET
I think the most relevant "market condition" here is the ~0.15 swing in the exchange rate of the dollar/euro since July. With a global swoon, the dollar has been gaining. Depending on how it is financed, of course, that alone could be the deal breaker. (Man, am I steamed about the prices I paid for 2006 Burgundies, inflated by the same spread.)
Troy Peterson
Burbank, CA —  November 7, 2008 4:37pm ET
James, I did a small $100M deal back in early 2006 and things were already difficult then. I was surprised that anyone was still doing deals when I heard of the Montelena/Cos deal. I dare say that the winery will not be re-energized, that bitterness has set in, and things will end on an acrimonious note amongst the various beneficiaries once Mr. Barrett has passed off the scene. It's truly a tragedy. We visited the winery back in 2006 and all in the group were completely underwhelmed by the quality of the wines but overwhelmed by the beauty of the grounds. Perhaps they should charge admission...

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