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Why a sale of Casella Family Brands is no slam-dunk - just-drinks thinks

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Against a backdrop of sizeable M&A transactions (and speculation) in the wine category recently, rumours of another deal would suggest a sale would be more likely to proceed than not. There's something about this week's reports on Casella Family Brands, however, that doesn't look quite so simple to me.

Is Yellow Tail poised to get new parents?

Is Yellow Tail poised to get new parents?

Earlier today, The Australian Financial Review cited anonymous sources in a report claiming Casella Family Brands, owner of the Yellow Tail franchise, has hired bankers "to test the appetite of potential buyers". The report prompted Casella to issue a statement admitting it "has received a number of approaches over an extended period of time".

More recent approaches, the company noted, have been sparked by the divestment of Accolade Wines to The Carlyle Group just over a year ago. Investors' interest in the wine category has also been triggered, according to Casella, by claims earlier this year that Pernod Ricard was looking for a suitor for its wine brands and operations. Throw in Constellation Brands' pending offload of around 30 brands to E&J Gallo, and it makes sense that wine is seen as a seller's market right now.

Could Casella be the next, then, to sell up and ship off?

I have my doubts.

The reason's in the name: Casella remains family-owned. Founded in 1969, the company is still fully controlled by the founding family. "1969?" you may counter: "That's only fifty years!" I agree, that's not a particularly long time for a family's roots to become inextricably intertwined with a business. The thing is, time moves much slower in wine. A year in, say, spirits, is equivalent to seven years in wine - like dogs.

Consider also what, according to Casella, has prompted recent interest. Accolade was offloaded by private equity group CHAMP to private equity peer Carlyle. Pernod, meanwhile, is a listed company. So is Constellation. In each instance, emotion will have played/would play no part in whether to sell up. We can't say that's the case when families are involved, can we?

I can understand investors and other wine companies looking at Casella's success with the Yellow Tail phenomenon, then learning that the wine brand is owned by a small Australian family unit, and thinking: "They'll sell if the price is right."

In wine, especially, 'exit strategy' doesn't exist in a family's vernacular.


Expert Analysis

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