Wednesday, July 23, 2008

Chateau Montelena Sold to Cos: Would this Trigger More Euro Buying in CA?


The biggest news in winedom that broke out yesterday is the sale of the venerable Napa winery, Chateau Montelena, to top Bordeaux classed-growth estate Ch√Ęteau Cos d’Estournel.

There is no announced sum for the transaction, but the credible rumor is $110 million—a whopping price even discounting the weak dollar versus the euro. In this regard, Chateau Montelena has pulled off its biggest shocker since winning the Judgment of Paris in 1976. But more significantly, I think, it is an indication that top Napa wine estates could have values almost as high, if not as high, as some of the great chateaux in Bordeaux.

Would this sale prompt more European winery acquisitions in Napa or in other points in California for that matter? Taken together with other high-profile European takeovers of US companies of late, there could be a rush of buying while the dollar remains cheap for the euro. Prime candidates could be long-established wineries with proven vineyards but in need of cash to refurbish aging facilities and vineyards.

But what’s in it for European buyers like Cos? Simply put, it is the still untapped potential in California wines, both in terms of quality and marketing. Thirty years after Judgment in Paris, the French are finally acknowledging that California wines are worthy to stand next to French wines, provided, of course, they are in charge.

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