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New Investor Takes Control of Duckhorn Wine Co.

Pioneering Napa producer had been searching for a new partner to help the 80 investor families cash out

James Laube, Daniel Sogg
Posted: July 31, 2007

GI Partners, a private-equity firm based in Menlo Park, Calif., and London, announced today that it had made a "controlling investment" in Duckhorn Wine Co., which owns the Duckhorn and Paraduxx wineries in Napa Valley and Goldeneye in Mendocino's Anderson Valley. Terms were not disclosed. Sources familiar with the winery's plans to find a new partner or sell the company outright said the asking price was in the $250 million range, but because only a portion of the company was sold, the value of the transaction is unknown at this time. Duckhorn had been looking for a new investor to cash out some of its older investors for some time.

"With 80 investor families it seemed like a good time for us to look at how to monetize their position," said Margaret Duckhorn, the wine company's cofounder and executive vice president of sales and marketing. "It was the right time for us to do this. One of the things that was so attractive about GI Partners is they are very supportive of our management team and what we've accomplished."

Margaret said that she and company CEO Dan Duckhorn "are both willing to [continue] to be involved."

Along with its three production facilities, Duckhorn owns seven vineyards comprising 168 acres in Napa and four vineyards totaling 153 acres in Anderson Valley. The Napa properties are located in five different appellations: the (proposed) Calistoga AVA, Howell Mountain, St. Helena, Yountville and Napa Valley. In addition to the Duckhorn, Paraduxx and Goldeneye brands, the company also has two second labels: Decoy, which uses fruit not included in Duckhorn; and Migration, made with grapes from the Anderson Valley properties. Prices for the brands range from about $30 for Decoy up to $95 for single-vineyard Duckhorn Cabernets.

Margaret and Dan Duckhorn started their business in 1976 with eight investors, producing their first wines in 1978. (The couple divorced in 2000.) Though they have often made outstanding Cabernet Sauvignon, they are best known for Merlot, a variety that they helped pioneer in Napa Valley. "Dan went to France [in the mid-70s] with [winemaker] Ric Forman and tasted there, and we decided we also wanted to do Merlot," explained Margaret Duckhorn.

They found that Merlot worked well as a varietal bottling or blended with Cabernet, which can be excessively firm and tannic on its own. "People really liked that approachable style," said Duckhorn. She noted that when they began replanting vines in the late '80s, following a phylloxera outbreak, they were able to select clones, rootstock and trellising methods that improved the quality of Merlot--a variety that can be challenging to grow because it flowers early, so it's particularly susceptible to cool, crop-reducing conditions.

Duckhorn, which does not disclose production figures, uses an equal mix of estate and purchased grapes for the Paraduxx red blend (primarily Zinfandel and Cabernet Sauvignon) and for the Duckhorn wines, which comprise four Merlots, as many as five Cabernets and one Sauvignon Blanc. Goldeneye Pinot Noirs are made primarily with estate-grown fruit. The company currently has 75 employees.

This is the first wine-industry investment for GI Partners, which, according to its website, "manages approximately $2 billion of private equity capital" in diverse sectors, including healthcare, real estate, hospitality and technology. Rick Magnuson, executive managing director of GI Partners, was not available for comment, but a source familiar with the company who would not speak for attribution said that GI seeks companies with experienced management teams that do not need wholesale changes. "You won't see Daniel Duckhorn disappearing," they explained.

According to Margaret Duckhorn, the deal has been in the works for about six months and should be completed in another eight to 12 weeks. "We're very excited about our new partners. They share our vision and commitment for the future to continue to grow, expand the brands and focus on high quality," she said.

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