Black Hills Sells for Many Gold Coins

Black Hills, which moved into a new 743-square-meter winery last year on Black Sage Road south of Oliver, is best known for its flagship Bordeaux blend, Nota Bene, and for a Sauvignon Blanc-based white, Alibi.

Now all in their 50s, the Black Hills founders - Susan and Peter McCarrell and Bob and Senka Tennant - have decided to cash in eleven years after moving from Vancouver business careers in 1996 to develop first a vineyard in the Okanagan and then to open the winery.

"Essentially, we are happy about the transaction," Bob Tennant said in an interview. "We are on top of our game and that is perhaps a good time to move on to something else."

He and Senka intend to remain active in the British Columbia wine industry. The winemaker at Black Hills, Senka has committed to remain as consulting winemaker at least until mid 2009.

"We are still bitten by the wine bug and that part will probably go on forever," Bob Tennant said. "We may look at something smaller. Senka is definitely bitten by the Sauvignon Blanc bug and probably would like to study that more."

The new owners plan a significant expansion at Black Hills. Now, the winery produces about 4,000 cases a year. Over the next five years, that is to be increased to between 8,000 and 10,000 cases.

The collectors of Nota Bene should also expect to pay more for their favourite red.

"At a current price of $39, Nota Bene sells at a discount to its peers," Vinequest said in an offering circular being sent to potential investors. "... Given the higher prestige that is given to Nota Bene wine in the market relative to some of its more expensive peers, there appears to be room for more realistic price growth."

Vinequest is run by Calgary businessman Glenn Fawcett. He was the launch manager for Therapy Vineyards, the Naramata winery that was established in 2005 by another group of investors primarily from Alberta.

Fawcett's company is now seeking to raise between $5 million and $10 million through the sale of limited partnership units at $25,000 each. The money will be used to finance the acquisition of Black Hills.

The sale is set to close by the end of this year unless Vinequest, which is making imvestor presentations during the last two weeks of October, cannot raise a minimum of $5 million. Should that happen, Black Hills, now that it is in play, would likely be sold to different buyers. "If we were 30, we would work at taking it [the winery] to the next level," Bob Tennant said. "But we are not, and there is no changing that."

When the two founding couples began sounding out interest from potential buyers this fall, they anticipated it might take as long as two years to sell Black Hills. "Then, bang, within a week or so, we had the offers on the place," Tennant said.

Vinequest's circular discloses that Black Hills is being acquired for $11.3 million. That includes 14 hectares of vineyard land (10.5 hectares planted), the new winery just completed last year, 3,645 cases of wine from the 2006 vintage and all the wine being made in this vintage. Tennant described the quality of the 2007 grapes as "beautiful" and predicted "some great wines".

Vinequest plans to double production at Black Hills, by either buying another 10.5 hectares of vineyard or by signing long-term grape purchase contracts.

"Thanks to the steady growth of the wine tourism market in the region and the Winter Olympics in 2010, [Vinequest] feels that there are significant growth opportunities for the Black Hills brand and business," the circular said.

Vinequest intends to open the Black Hills tasting room, which has rarely been open to date because the wine releases sell out within weeks each year. Fawcett's group also believes there are opportunities to sell additional merchandise in the winery and to develop a restaurant and guesthouse catering to wine tourists.

Fawcett has already added some Hollywood pizzazz to raise the low profile of Black Hills, announcing that Canadian-born Hollywood actor Jason Priestley has made "a significant investment" in the Vinequest Wine Partners limited partnership and has joined the board of directors.

All limited partners will qualify for a number of benefits, including a free case of wine annually for each $25,000 unit and a preferred place in line for buying new releases.

Vinequest also intends to cash out of Black Hills. According to the offering circular, Vinequest intends to "achieve a liquidity event for the Partnership in a 5 to 7 year time frame [by] selling the Business and Assets to a private buyer or a public company involved in acquisitions of wineries."