By Ray Lilley
Friday 21st July 2000 |
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![]() But it all hinges on three key events |
The new offering, The Crossings (Marlborough) of the Awatere Valley, will own three vineyards - two developed, one still bare land - covering 140ha.
It will have an annual output to make it a New Zealand top-20 wine producer, focused on the top-of-the-range sauvignon blanc and pinot noir varieties sought after in international markets.
Although it has no wine now, within a year it expects to do its first pressings and produce its first 8500 cases of sauvignon blanc.
The Crossings will contract its winemaking initially and look at its own winery around 2004, based on cost efficiency.
Vineyard manager Richard Bowling is projecting 62,500 cases within five years, some 7000 of them pinot noir, just short of the 70,000 cases planned as peak capacity from the three yards.
With a total of 630,000 litres (840,000 bottles) of output a year by 2006, The Crossings will target the US, Canada, Japan and the UK as key markets for the superior wines it predicts will come from its three Awatere Valley blocks.
It has signed up California-based International Wine Associates as its marketing arm, a company that has "a client list that reads like a Who's Who of American wines," Mr Bowling said. It expects to realise up to $25-$30 a bottle for its premium wines and $15 for its standard output.
In return, IWA will be paid an annual fee of 2.25% of total gross revenues of the company - projected to be $177,000 by 2005 - plus $250,000 a year contribution for marketing costs.
None of the wine produced is for general sale within New Zealand, where only shareholders will be able to purchase it - at a discount.
All this hinges on three key events.
The first is agreement by two vineyard partnerships, Brackenfield (200 unit holders) and Medway (70 unit holders), to sell by July 28 their developed yards into the new company in exchange for shares, preference shares and some early dividends.
The second is an initial subscription of a minimum $1.2 million by unit holders and the public to kick-start the development of the third vineyard, The Crossings, by August 14.
The third is completion of the raising of the $7 million needed to fund the project, including the purchase of the Medway ($3.3 million) and Brackenfield ($2.7 million) assets. The offer, opening August 21 with 1000 parcels minimum, closes December 15. The first dividend for ordinary shareholders is scheduled for December 2005.
The company expects $2 million of its funding to come from the dedicated investors already in the two partnerships, the rest from the public or debt.
As well as being offered a healthy discount on their share prices, current unit investors have already seen capital gains of 55% over five years on the Medway project and 37.5% over two years at Brackenfield. The sale of their vineyards into the new company will help realise these initial gains.
The gains reflect the rising prices of vineyard land in the Awatere Valley, where bare land has gone from $400 to $3200 a hectare in a decade and is now rising steeply as more players move in.
By 2005 the company will have equity capital of $13.2 million and will pay a dividend of 8 cents per $1 share, fully imputed. Convertible preference shareholders (current partners)will be paid 5 cents fully imputed from 2001-2004.
The project will see Farmers Mutual Group, which created the two vineyard partnerships, quietly back out as The Crossings amalgamates the assets and holdings of the partnerships.
The Crossings will add the key ingredient of the 63ha third vineyard to the project on the prime uplifted Awatere river flats.
Already the presence of winemakers Vavasour, Villa Maria, Babich, Montana and Nautilus indicates the potential quality and value of the valley's output.
Mr Bowling is adamant the 2000ha of planted vineyards are "just scratching the surface" of what he calls the Awatere opportunity for quite different fruit styles and wine characteristics.
"The Awatere will ... broaden the range of wines from the [sauvignon blanc] grape." He believes no other country "can achieve the great range of styles coming out of Marlborough, which is producing such distinctive sauvignon blancs, which can't be emulated by the competition.
"But the most critical thing is the market."
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