WS: Insurance Giant Buys Ch. Lascombes

[JonB]

While this is not the latest news, I thought the article was interesting.

a) the statement about it being a real estate investment (well it is, just that the price of the real estate is driven by the profitability of the product);

b) a relatively unbiased statement about this 2nd growth's Asia versus US sales (although they surely don't know their gray market distribution);

c) another example of expanding acreage

d) the tremendous financial returns to owners


Insurance Giant Buys Bordeaux's Château Lascombes
French company pays $280 million for Margaux second-growth, sees a long-term investment
Suzanne Mustacich
Posted: July 11, 2011 French insurance company, Mutuelle d’Assurances du Corps de Santé Français, has acquired Château Lascombes, a second-growth in Bordeaux’s Margaux appellation, for 200 million euros, or about $280 million, from American private equity investors Colony Capital. “We are very impressed with the investments by Colony and will continue what they started,” Marcel Kahn, CEO of MACSF, told Wine Spectator.

When Colony purchased Lascombes in 2001 for $69 million, the estate needed a drastic overhaul. The investment firm spent several million dollars to build a four-level, gravity-fed cellar and to expand the vineyards from 208 acres to 291 acres, including 15 acres in the Haut-Médoc.

Prices have increased, at least partially due to improved quality. The 2000 vintage was released at 22 euros a bottle as futures; the 2010 vintage (which received a preliminary score from Wine Spectator of 89 to 92 points during a barrel tasting) was recently released for 72 euros, a 227 percent increase. Dominique Befve, the current general manager, is to remain at the estate.

According to Kahn, the deal is about making a smart investment. This is the first move in the wine industry for the insurance giant, which found it had $560 million worth of “space” in its asset portfolio for real estate. “When you manage assets today, you have a scary landscape,” said Kahn. “You have no idea what stock prices will do. And you need to invest in something solid. Château Lascombes is in Bordeaux, in Margaux. There is a limited supply and increasing demand.”

Also attractive is that Lascombes is well distributed in America and in China. About 40 percent of the production goes to the United States, and another 30 percent to Asia. “China is increasing its demand for Margaux.” said Kahn. “The stock in the cellars is worth $70 million,” he said, confident their investment “could become profitable very quickly.”

MACSF has an annual turnover of over $2.98 billion, and with its deep pockets, made the purchase without financing. Lascombes will amount to just 1 percent of MACSF’s assets. And unlike Colony Capital, which was under pressure to sell the château within a certain timeline, MACSF considers this a long-term venture. “Time is a key point when you invest in a château. You need time,” said Kahn. “We are providing eternity.”

[Houndsong]

"According to Kahn, the deal is about making a smart investment."

2001/$69 million plus "several million dollars" to 2011/$280 million is a smart investment. Remains to be seen if returns will validate the comment. Dow Jones was a smart investment, MySpace was a smart investment, Volvo was a smart investment, etc., etc.

[stefan]

One more insurance company that I hope goes broke (but only after paying off its policy holders).

[JimHow]

So... Are social security checks going out in August?

[Tom In DC]

$70 million in stock in the cellars sounds like they've held back quite a bit of wine.

[stefan]

Or they could not sell it.

[JCNorthway]

Jim, great juxtaposition!

[Tom In DC]

I was mostly thinking about recent discussions about how much Bordeaux wine is retained in Bordeaux. However, as they increased the value of the estate by 200% in 10 years (after subtracting the wine in the basement), I don't think they had to sell it.

It would be interesting to see if the value would hold up as they did try to sell all of the wine...

[Houndsong]

Yeah, the valuation of inventory is interesting. I'll bet that was a negotiating point, with Tom Barack marking every bottle to market.

[Ramon_NYC]

Prices have increased, at least partially due to improved quality.

Tongue-in-cheek statement.