Private equity works the vineyard with $250 million fund targeting wineries

There's no shortage of wine enthusiasts in the Bay Area's private equity and venture capital firms, but few of their investment dollars pour into the wine business.

But San Anselmo-based Vinum Capital Management hopes to change that with its first fund, with $250 million, focused on acquiring premium and super-premium wineries.

"There is currently very little equity capital available in the middle market wine industry," said Stephen Kuhn, general manager and managing partner at Vinum. "Our fund objective is to address the growing pent-up demand for equity capital in this sector of the market."

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The firm's timing might be good since more than half of California's wineries are expected to change owners over the next decade, according to a study by Silicon Valley Bank (NASDAQ: SIVB) and Scion Advisors. About 80 percent of all wineries are first-generation owned, and as the majority of vintners near retirement age after two or three decades in the business, most of their net worth remains tied up in their properties.

Vinum's investment partners include Justin Faggioli, formerly chief operating officer of Ravenswood; Scott Setrakian, former director of Golden State Vineyards; and G. Craig Vachon, a financing and M&A expert.

The fund's portfolio management team includes Bill Foster, formerly from Beringer; Jonathan Pey, formerly from Robert Mondavi and Fosters Wine Estates; Doug Rogers, formerly from Gallo, Southcorp, and Brown-Forman Wines; and Bob Steinhauer, formerly from Beringer and a well known viticultural expert. Strategic The fund's advisers include Don Brain with VinREIT and Global Wine Partners; and Tom Hakel, formerly with Stag's Leap Wine Cellars.

"The focus of this fund is to acquire wine properties efficiently, grow them effectively with expertise and necessary growth capital, and ultimately sell them to strategic and financial acquirers," said Thomas Thornhill, a Vinum managing partner and chairman of the Mendocino Wine Co. He's also a former partner at Montgomery Securities, now part of Bank of America (NYSE: BAC).

Vinum, which worked with law firm Reed Smith in raising the fund, will put the money to work acquiring a controlling stakes and buyouts of wineries, wine properties and related businesses in California, Oregon and Washington.