Crimson Wine Group Asset Value

Valuing Crimson Based On Assets
Crimson has a stated book value of $8.12. However, this does not take into account the value of two of Crimson's most valuable estates. Crimson acquired Pine Ridge in 1991 and Archery Summit was started in 1993. These two estates are carried for next to nothing on Crimson's book due to GAAP accounting. In 2001 these two estates were put on the market for $150 million as seen in this Wine Spectator article. It makes little sense that they are assigned almost no value.
Napa Valley estates trade at record prices and at significantly higher prices today than they did in 2001. It is estimated that the Araujo Estate in Napa recently sold for over $100 million (or $2,630,000 per acre) . Araujo, has 38 acres and produces approximately 6,000 cases a year. Inglewood Estate, recently sold for an estimated $20 million (0r $666,000 per acre). Inglewood has 30 acres and produces 5,500 cases. The new owners are rebranding the estate suggesting weakness of the Inglewood brand.
Pine Ridge, which is located in Napa, currently produces 80,000 cases a year and has 168 acres. Pine Ridge has an additional 46,000 cases of capacity. Inglewood'd brand is clearly is clearly inferior to that of Pine Ridge. At Inglewood's valuation ($666.6 k per acre) Pine Ridge would be valued at $112 million. At Araujo's valuation ($2.63 million per acre)Pine Ridge would be worth $442 million. The answer to Pine Ridge's valuation likely lies somewhere in between. I believe that Pine Ridge alone could be sold for at least $200 million.
Archery Summit is the premiere estate in Willamette, Oregon. Archery Summit has 100 acres and produces 15,000 cases a year. Archery Summit is able to charge $150 for its Pinot Noir, far more than any other winemaker in the region. I estimate the value of Archery Summit to be $20 million.
Crimson's purchased its three other estates in recent years. Seghesio was bought for $86,000,000 in May 2011 and is located in Sonoma. Since then the value of Sonoma estates have risen significantly. Additionally, Crimson expanded capacity and has grown sales at Seghesio. Seghesio would likely sell today for over $100 million. Chamisal was bought for $19,200,000 in August of 2008. The purchase price of Double Canyon in 2005 and 2006 was undisclosed but I estimate it to be worth at least $10,000,000. Crimson recently sold land that it was not using at Double Canyon for 70% above book value. It is possible that even the land that Crimson bought in recent years is being carried drastically below market value.
The table below summarizes my estimate of the value of Crimson's wineries:
WineryValue
Pine Ridge / Archery Summit$ 220,000,000
Seghesio Family Vineyards$ 100,000,000
Chamisal Vineyards$ 19,200,000
Double Canyon$ 10,000,000
Total$ 349,200,000
Adding my estimated land value to the $30 million in cash & investments Crimson will likely have at the end of this quarter yields a tangible book value of roughly $15.50, or a price 75% higher than the current quote.

1 comment:

Chris Ripley said...

To me the biggest knock against this name is I just can't see how they monetize the assets. Wine is a commodity and they don't have the scale to produce it profitably. An outright sale of the company would obviously do the trick, but it doesn't seem that mgmt or the Leucadia guys are inclined to go this route.