Casella Wines, makers of Yellow Tail, to sell 35 properties in huge vineyard auction
The nation’s biggest winemaker, Casella Family Brands, is undertaking the biggest Australian vineyard sale in recent history, amid a massive strategic shift in its operations.
Casella Family Brands, the nation’s largest privately owned winemaker, will sell most of its vineyards in NSW and South Australia in the biggest vineyard sale in recent history, marking a radical strategic shift for the 53-year-old family-owned winemaker.
Casella has launched the sale process for its vineyards and accompanying property, covering 7258ha across 35 properties – about two-thirds of its total vineyard footprint.
Up for grabs will be vineyards that produce grapes for Casella’s global blockbuster Yellow Tail, as well as other brands that feed into its rapidly growing portfolio of wines. The planned vineyard sale includes first-class vineyards dotted across some of Australia’s most respected wine regions, such as the Barossa Valley, Clare Valley, Langhorne and Currency Creek, Limestone Coast, and the Riverina.
It is the biggest single sale of vineyards as one lot in living memory in Australia, and should raise tens of millions of dollars for the Casella family, who are planning to inject the fresh cash from the sale into its growing wine brand portfolio and create new alcoholic beverage brands, including ambitions for its burgeoning whisky distilling.
Since 1969 the Griffith-based Casella winery, founded by Italian immigrants Maria Casella and her husband Filippo, has built up its large vineyard holdings to cover some of the best winemaking regions in Australia.
But now the Casella family, led by second-generation owner and managing director Giovanni ‘‘John’’ Casella, is pivoting to a new capital-light and asset-light strategy, where most of its vineyards will be owned and operated by a third party.
This will unshackle the Casella family from the onerous and expensive job of running the vineyards and allow them to concentrate their efforts and investments in the Casella wine brands, growing export markets and moving into new beverage categories such as spirits, beer and seltzer.
Sales and leaseback deals have become a larger part of agricultural property in recent years, with transactions also including takeovers of listed companies.
Several companies have shown an appetite for these types of assets, including vineyards.
Macquarie Agricultural Funds Management last year won the heated battle for control of citrus and berry farm owner Vitalharvest, beating out Roc Private Equity for the portfolio after a prolonged fight that saw a string of bids and counterbids launched – sometimes within hours of each other – as the suitors grappled for control.
Vitalharvest owned four berry properties in NSW and Tasmania and three citrus orchards in the Riverland region of South Australia, all leased to Costa Group Holdings.
Investment manager Centuria Capital is also active in agricultural sale and leaseback deals.
Last year it bought a stake in a vegetable-growing glasshouse in Victoria’s West Gippsland region, with the $177m facility seeding a new agriculture-focused fund.
The company has flagged making more agricultural investments after taking over fellow listed fund manager Primewest last July.
The listed Rural Funds Group has also been active and flagged its appetite for further sale and leaseback transactions.
Other big players include funds manager Warakirri, which last month seeded a $500m farmland fund with two orchards, buying two stone fruit orchards in Victoria and NSW and signing a long-term lease deal with fruit producer, W.F. Montague.
Last month leading retail drinks and hospitality business Endeavour Group completed the acquisition of Josef Chromy Wines in Tasmania, acquiring it in a partnership with Warakirri Asset Management.
That deal was for $55m and only covered 110ha of land, which is tiny compared to what is up for sale by Casella.
Casella is Australia’s largest family-owned winery and the nation’s largest wine exporter by volume.
Its Yellow Tail brand accounts for about 17 per cent of all Australian exported wine. Their winery’s flagship brand emerged after the Sydney Olympics to quickly become the biggest imported wine in the US.
In a testament to its selling power in the US, the billionth bottle of Yellow Tail was pumped out of its production facility in 2013. It has become the flag bearer of the “cheap and cheerful’’ Aussie wine style that blanketed the US and European markets.
Casella also owns Brand’s Laira, Peter Lehmann and wineries in Victoria that specialise in fortified wine.
As part of any vineyard sale deal a long-term sale agreement will ensure Casella retains the wine grapes from these vineyards to ensure ongoing supply for its established brands.
John Casella said the decision to offer the vineyards for sale followed an extensive review of operations.
He said it aligned with a strategic objective to focus resources on setting the business up for long-term success.
“The company is in a sound financial position, having recently experienced global record sales for Yellow Tail during the Covid-19 pandemic,” he said.
“While demand has stabilised, we are forecasting future growth due to ongoing investment in our brands supported by a strategic innovation pipeline.
“The intended strategic partnership will allow us to focus on strengthening our brands globally, and therefore deliver positive outcomes for the Australian wine industry.”
Some Casella-owned vineyards located in the Riverina and Barossa are not for sale, as well as its Victorian vineyards, which include Baileys of Glenrowan and Morris of Rutherglen, as Casella seeks to build up its assets and holdings of fortified wines.
The extensive land sale, handled by Colliers, will not impact longstanding relationships and contractual agreements for Casella to source grapes from South Australia and NSW.
The decision to sell off the majority of its vineyard holdings is the biggest shake-up of the Casella family wine business since John Casella began leading the company.
In early 2017 the Casella family restructured the family-owned business through a share buyback that valued the private winemaker at $1.5bn and helped to hand down the company to the second generation.
Following the death of co-founder and major shareholder Maria Casella two years before that, her 45 per cent stake in Casella Wines passed to her three sons, John, Giuseppe and Marcello, to ensure the winery remained firmly in family hands.
In a share buyback agreement and notice of meeting prepared by lawyers at the time, the restructure saw 3210 fully paid shares in Casella Wines – or 5.34 per cent of the company – bought back from three trusts at $23,332.56 per share and a total nominal value of just under $75m. The documents showed the winemaker had issued capital of just over 60,000 shares, placing a value on the entire company of $1.5bn.
Casella is now owned by the three brothers, with managing director John Casella taking a 50 per cent stake, 30 per cent for Marcello and 20 per cent for Giuseppe ‘‘Joe’’.
Latest financial accounts for Casella show it posted revenue of $518.38m for the 2020 financial year, up from $491.035m in 2019.
This sales boom translated into a much higher bottom line with profit hitting $48.75m, up from $33.73m in 2019, a gain of 44.5 per cent.
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