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Chateau Montelena Sale Falls Through

Famed Napa Valley property is off the market; French buyer had trouble with financing in current economy

Daniel Sogg

Posted: Wednesday, November 05, 2008

Aftershocks from the worldwide financial crisis have indeed hit Main Street in Napa Valley. The sale of Calistoga winery Chateau Montelena to Frenchman Michel Reybier, owner of Bordeaux estate Château Cos-d'Estournel, has collapsed, not quite four months after it was initially announced.

Dissolution of the sale, which was reported to be for between $120 million and $150 million, was announced in a press release from Montelena this morning, which stated, "Reybier Investments has been unable to meet its obligations under its contract with the Barrett family, who will retain ownership and not offer the winery for sale." Neither Jim Barrett, founder and a principal owner of Chateau Montelena, nor representatives of Reybier responded to requests for comment.

Rumors that the sale was in trouble began to circulate in Napa last week. "I heard that there were significant problems raising the financing, not that the buyer doesn't have the cash, but that there were financing issues at the real-estate end of the deal," said an industry executive who would not speak for attribution.

The worldwide credit crunch has presented enormous challenges for anyone trying to complete a deal of this magnitude. "No one knows where the credit markets are going. No one knows where the economy is going. There's just tremendous uncertainty now," said Vic Motto, CEO of Global Wine Partners, the investment firm that represented Chateau Montelena in the negotiations.

Though neither Barrett nor Reybier would discuss the matter, Reybier might have wanted to renegotiate given the economic upheaval. In addition to the credit crunch, the euro has lost significant value since the deal was first announced: In July it was at $1.60 U.S. dollars, and today it is at $1.29 (that translates to an increased cost of approximately $30 million). Major acquisitions are usually structured so that both the buyer and seller have the option to renegotiate during the due diligence process and while they are arranging financing.

Motto and Chateau Montelena general manager Greg Ralston said that the winery is no longer for sale. "I think after going through this process there will be other options the family will pursue," said Ralston, who would not offer further detail.

Chateau Montelena achieved international prominence when its 1973 Alexander Valley Chardonnay won the 1976 Paris Tasting. The property currently makes about 37,000 cases in an average year, including 10,000 cases of Calistoga Estate Cabernet, 9,000 cases of Napa Valley Chardonnay and 14,000 cases of Napa Valley Cabernet. The estate property in Calistoga has 125-planted acres, including 95 acres of Cabernet Sauvignon.

The press release also indicated that Bo Barrett, Jim's son, is now a limited partner at Montelena, "contributing his experience and expertise as technical advisor." Winemaker Cameron Parry handles daily winemaking responsibilities.

Although the winery may no longer be for sale, it's not clear what Jim Barrett's long-term plans are. Speaking with Wine Spectator in July, Barrett said that the decision to sell was a result of estate issues and his health. "I'm 81 and a half … and my death would have been a financial disaster for the winery," he said. Those issues certainly remain.

The vineyard and production facility are also in need of work. About 20 acres in Calistoga are slated for replanting, and Montelena continues to upgrade its winery equipment. Despite the collapse of the sale—and the anticipated capital infusion from Reybier—they are still able to move forward with the upgrades, said Ralston.

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