Why Sell Sebastiani Now?
The historic Sonoma winery sold for a surprisingly low price; the swooning economy or longtime family tensions may have played a role
Tim Fish
Posted: December 29, 2008
When the Sebastiani family, one of California's oldest winemaking dynasties, agreed to sell its 104-year-old winery this month, it sparked considerable speculation about the reason and the timing of the sale. Were there pressing financial reasons stemming from these tough economic times, or did longstanding family strife finally come to a head?
The Sebastianis have offered few details about the planned sale to the Foley Wine Group, though a source familiar with the deal pegged the price at $47.5 million. That's considerably less than the original asking price, which was reportedly in the $100 million range. According to CEO Mary Ann Sebastiani Cuneo, at least two potential sales fell through, but she declined further comment last week.
"The question of why now certainly did come up in family discussions," said Don Sebastiani, who, along with his siblings, Cuneo and Sam Sebastiani, is a principal owner of the winery. "The decision to do this was not a unanimous one. We have very sharp differences behind closed doors, but we try not to air our differences in public."
Each of the three siblings has taken turns running the family business over the years. When their father, August, died in 1980, Sam took over but was later ousted in a high-profile family squabble. Don then took the helm but stepped down in 2001, when Cuneo became CEO.
The winery sold most of its value brands such as Vendange, Talus and Farallon in 2000, and the family has focused almost exclusively on the Sebastiani label since, trimming production to about 280,000 cases, building a new production facility and visitors center, and generally improving quality and the image of the brand.
Just how financially successful that transition has been remains to be seen; the family is mum. Don conceded that the challenge of passing a business down through the generations is a complicated one but did not say that it was specifically a factor behind the sale. At least one of the principals, according to a source familiar with the deal, was in need of money and pushed for the sale.
Considering the sad state of the economy, the timing seemed questionable. As one wine finance insider put it, "This isn't a good time to sell anything!" The reported sale price seems low compared to revenues, which were reportedly $33 million last year. In better times, smaller wineries such as Arrowood Vineyards sold for $45 million, while another historic winery, Buena Vista, sold for $85.5 million in 2001.
Foley Wine Group is owned by William Foley, chairman of the Florida-based Fidelity National Financial Inc., which had gross revenues of $5.5 billion last year, putting it at the 435th spot on the Fortune 500 ranking of the largest U.S. companies. Foley has recently purchased other wineries and brands, including Venge Vineyards and Cabernet specialist Merus in Napa, as well as Firestone Vineyards in Santa Barbara and a controlling stake in Three Rivers Winery, in the Walla Walla region of Washington state.
Longtime Sonoma Valley vintners call the sale an end of an era, but are hopeful that Foley will expand on the Sebastianis' rich tradition. Winemaker Richard Arrowood, who as a kid often visited Sebastiani winery with his family, called the winery "an icon."
Ravenswood winemaker Joel Peterson remembered hanging out at the old L&N Donut shop in Sonoma in the 1970s when August Sebastiani would "hold court." Peterson said, "The family was really the foundation of Sonoma Valley wine for many years."
While Don said he's nostalgic, he pointed out that the sale includes the winery and visitors' center, brand and inventory, but it does not include all of the family's vineyard and land holdings in Sonoma Valley, which are considerable. The sale does include the winery's historic Cherryblock Vineyard but the family retains two of its largest vineyards, Green Acres and Wilson Ranch, at least for now.
"I think," Don said, "the book is not closed on family involvement in that winery."
