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$280 million for Latour? A steal

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The widespread reports that Chateau Latour is for sale for between $200 million and $280 million have me wondering how these winery valuations are arrived at. Granted, $280 million is a lot of money. But somehow, a quarter-billion seems like a steal. After all, this is Latour, the crown jewel of Pauillac, the emblem of the Médoc. This is the wine Thomas Jefferson called one of the four greatest in Bordeaux (it was known then as La Tour de Segur). Hugh Johnson called it the most consistent great wine in the world. Latour’s former managing director, Jean Gardere, described it as “a Rubens heroine,” which is a nice metaphor.

venusadonis

Venus and Adonis, by Peter Paul Rubens

So $280 million is pretty paltry for all that greatness. Consider the prices that major California wineries have sold for. Last year, Diageo paid $105 million for Rosenblum. In 2001, Constellation bought Ravenswood for $148 million. Now, Rosenblum and Ravenswood are wonderful wineries, but it’s not disrespectful to point out that they’re no Latour. Nor was Robert Mondavi Winery, which went to Constellation for $1.35 billion in 2004. I suppose a case can be made that Mondavi was the closest thing Napa Valley had to Latour, in the sense of being an emblem. (The arch and campanile in place of the tower.) But still, there could never be a serious comparison between Mondavi and Latour. The only wineries you can compare Latour to would be Bordeaux’s other Classified Growths, and then, only a handful of them.

Maybe I’m just being romantic — blinded by the light of Latour, unable to grasp that a winery is just a business. I tend to think too much with my heart anyway, and to forget that when somebody buys a company, it’s based on three things: money, money and money. Constellation bought Mondavi not so much because they wanted to own an icon, but because they thought it would make them a profit. (Mondavi’s iconic status was frosting on the cake.) But still, Latour somehow seems more than just 2-1/2 times more valuable than Rosenblum. With production around 20,000 cases annually (depending on the vintage) and the 2005 selling for about $1,300 a bottle, Latour is a guaranteed money-maker (admittedly, prices are set by the market; the winery doesn’t get all that money). Even in this worldwide recession, Latour will be fine. It’s come through every down cycle in the world for the last 400 years and it will survive this one. Maybe that’s why Bernard Magrez, one of the richest people in the world, is rumored to be considering buying it. If he does, he’s getting a bargain.

  1. Steve

    “I think too much with my heart anyway” – you sound like Stephen Colbert 😉

    When any business is purchased the price is based on three things:
    Tangible infrastructure (holdings, buildings, vineyards, winery facilities, other assets as well as liabilities etc)
    Brand Equity (reputation of the brand)
    Future revenue (the net money the business generates annually)

    Checking Wikipedia, I see that, besides provenance, Latour has about 190 acres of vines and makes about 30K cases annually. To Kalon is 550 acres and Wappo Hill is 400 acres. In 2004, the winery made some 300K cases – not counting the production of any subsidiary labels.

  2. Make that last part: “not sure if that is counting production of any subsidiary labels”.

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