McWilliam’s Wines to be split in $40m-plus deal
McWilliam's Wines will avoid being liquidated after its administrators secured a deal, worth more than $40m, to split the 143-year-old company in two and ensure its $13 flagons of sherry keep flowing.
But the deal has come at a cost, with more than 60 staff, or two-thirds of McWilliam's total workforce, expected to be retrenched.
Under the proposal, Calabria Family Wines will acquire McWilliam's Hanwood winery and continue its brand, while Sydney investment group, Medich Family Office will take over the Mount Pleasant winery and assets. It is understood that up to one-third of McWilliam's existing employees will be offered jobs.
Administrator Gayle Dickerson said all redundant staff would be paid their full entitlements "in weeks, not months" and praised them for their "commitment and passion", which was vital to salvaging the heritage brand.
"The team has been fantastic through this process. Not everyone will get a job through this but we have kept them employed for 16 months or so through this administration process and certainly we will try to support those people," Ms Dickerson told The Australian.
"We got to know people very well through this process and their commitment and passion to the business has helped achieve this outcome, so we are very thankful to them."
The sale comes five months after Ms Dickerson and her co-administrator's initial preferred buyer - private equity and venture capital firm Prcstnt (pronounced "persistent") - failed to come up with the $46m needed to take over the group.
The Prcstnt proposal would have seen priority employees and secured creditors receive 100c in the dollar, while unsecured creditors a return of 94c-100c.
The return to creditors under the Calabria Family Wines and Medich Family Office process is yet to be confirmed. The total figure is dependent on final stock numbers, while McWilliam's vintage 2021 is still being fully costed.
Ms Dickerson said a report would be provided to creditors in about two weeks, detailing the exact return and final sale price. The deal is expected to be finalised by the end of the month.
Andrew Calabria, of Calabria Family Wines, said the Griffith-based group has invested in McWilliams for the long term and will focus on rebuilding the brand's core strengths.
"It does mean a lot to us. By all means we are not a corporate winery. We are a family winery, pretty humble and we have a lot of respect for the family that has built McWilliams," Mr Calabria said.
"As my dad said, the wine industry is funny, you can have all the private equity and look at the bottom line at the end of the year but for us, this is a long-term play. We want to be profitable of course, but we also want to leave something for the next generation."
Mr Calabria said while McWilliam's sales have been performing poorly in recent years, its brand awareness remained strong and Calabria Family Wines planned to capitalise on that.
"We view McWilliam's, and always have, as the pinnacle. They established the Riverina wine region and the brand still has quite a lot of equity. It's strong. Purchases are low and that is something we have to work on.
"But there is brand equity in it and that's so important to the New Zealand and Australian wine industry. As a family that's something we want to push for, in building the McWilliam's brand.
"They still carry a decent name across multiple price points. You can never fault the wine making. For us, it's about trying to connect with consumers and look at different trends that could align with the McWilliam's brand and hopefully there will be some growth opportunities from there."
But Mr Calabria was adamant the flagons would stay.
"I can definitely assure you that the sherry will keep on flowing. That is definite.
"We are looking at a lot of the sustainability piece and look at different options, and that will create a different footprint. But the sherry will still be produced."
McWilliam's entered into voluntary administration in January last year, 12 months after the company was forced to seek an urgent capital injection and pursue asset sales after it breached some of its lending covenants.
It had recorded cumulative losses of close to $90m since FY15. Meanwhile, the net asset position of the group reduced from $57.4m to $31.3m from June 30 2018 to December 31 last year.
One of the biggest drains on its finances was a 50-year lease, signed in 1974, on a warehouse lot in Chullora - near the former housing commission home of Paul Hogan where he lived while working as a rigger on the harbour bridge. McWilliam's agreed to pay 8.5 per cent of the unimproved value of the lots each year, with the site being revalued and the rent readjusted every three years.
Recent estimates value the warehouse at 68 Anzac Street, Chullora, at around $30m, meaning McWilliam's was paying rent just shy of $3m a year, which includes about $300,000 of outgoings. This equates to more than 3 per cent of its annual revenue of $87.5m, according to its latest accounts from 2018.
Making matters worse, McWilliam's hadn't used the site since 2017 and advertised to sublet it several times in the past three years. One agent even described the rent as "cheap" in an attempted to attract a tenant for McWilliam's.
One of the first actions from Ms Dickerson as administrator was to rip up the costly lease agreement. Another one of her early decisions was to commit to the 2020 and 2021 vintages.
Originally published as McWilliam's Wines to be split in $40m-plus deal