While prospects for insolvency have captured the attention of those following the W. J. Deutsch's lawsuit against Ascentia Wine Estates (AWE), the process has unleashed a series of  corporate mismanagement allegations against  CEO Jim DeBonis.

"Eight Estates [a former name for AWE] may or may not be insolvent in a purely technical sense," said one source associated with the process. "But there is no denying that it has serious sales and financial problems, most of which result from executive mismanagement. That said, the company's only way out of its financial jam may be to file Chapter 11 in order to force debtors to restructure its debt."

That source, along with 17 others interviewed by Wine Industry Insight, spoke only upon a guarantee of confidentiality, some because they were not authorized to speak with the media and others fearful of  "blowback."

"This is messy and going to get a lot messier before it's over," explained one source. "There will be collateral damage. People are going to get shot in the crossfire."

ALL SOURCES GIVEN OPPORTUNITY TO CORRECT & COMMENT

On Sunday evening, Wine Industry Insight emailed a draft of this article to DeBonis, Peter Deutsch and to all sources requesting corrections and additions by noon Monday. While not a standard WII practice, the shortcomings inherent in articles that rely heavily on unnamed sources demand an extra effort to insure a fair, accurate, complete and contextually accurate article.

Information from anonymous sources is never used by Wine Industry Insider unless it is corroborated by legitimate documents or by two or more independent sources.

Neither Deutsch nor anyone from his organization had any comment.

An email from DeBonis read, "Thanks for the opportunity, you definitely have your facts all wrong. I cannot get back to you by noon, but I will later on."

WIN had not received anything from DeBonis by 4:30 p.m. when this article was sent to subscribers,

In addition to its sources, Wine Industry Insight also relied upon W. J. Deutsch's legal complaint filed in Delaware Chancery Court.

DEUTSCH RAN OUT OF PATIENCE, FILED SUIT

"Bill Deutsch got tired of being ignored," said a source familiar with the controversy. "He felt stonewalled, lied to and believed that his legitimate concerns had been ignored. But you have to remember that he's also in litigation with another investment, Renwood Winery. I think he pulled the legal trigger so quickly on this one because he felt his patience with Renwood had been taken advantage of and he was not going to let that happen again."

"Even though WJD has a 27-percent interest, the rest is in the hands of Jim's allies, with GESD holding a whopping majority," said the source.

Ascentia acquired eight orphan Constellation Brands in June of 2008 as part of the $208,770,900 million deal that created AWE.

In that deal, all of AWE's land and wineries were acquired for $115 million by SBV VinREIT, an LLC operated by Kansas-City-based, Entertainment Properties Trust (NYSE:EPR). All the wineries and vineyards were then leased back to Ascentia.

VIP Subscribers click here to read the complete, un-redacted, 2,617-word original article.

Also In This Article:

The full text of the following sections is available to VIP Premium Subscribers).
  • GESD PROVIDED BULK OF FUNDING, GOT HEFTY FEES
  • GIRAUDO ONLY INVESTOR NOT SUED
  • AGREEMENT KEPT DEUTSCH FROM PROPER DUE DILIGENCE
  • IMPOSSIBLE FOR ASCENTIA TO MAINTAIN PREVIOUS SALES LEVELS
  • DEBONIS SHOULD HAVE KNOWN ABOUT "INFLATED FINANCIAL PROJECTIONS"
  • GESD THREATENED TO SUE IF DEUTSCH INVESTIGATED
  • MEDIA GIVEN WILDLY CONFLICTING ASCENTIA SALES FIGURES
  • ASCENTIA: NO STRATEGIC PLAN + INABILITY TO MOVE QUICKLY
  • DEBONIS NO "FREDDIE FRANZIA"
  • FINANCIAL WOES PROMPTED ATTEMPT TO SELL BUENA VISTA WINERY
  • VINREIT NIXED BUENA VISTA SALE
  • BUENA VISTA "LAME" BRAND HURT POTENTIAL SALE
  • BUENA VISTA NOW MOTHBALLED, HOPING FOR CUSTOM CRUSH
  • BARGAIN BASEMENT SALES OF WINE TO INVESTORS & INSIDERS PROVIDED STOPGAP CASH, DEPLETIONS
  • ASCENTIA TOO "BIG CORPORATE" FOR OWN GOOD
  • TOP EXECS FAILED TO HALT "TOXIC ENVIRONMENT"

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Inertia Beverage Group Acquires/Merges With New Vine

Inertia Beverage Group has emerged the winner in the financial rugby scrum to snag the remains of New Vine Logistics.

inertia-2009-500px

Observers said that IBG laid a winning body check on front-runner WTN Services Thursday when Bob Ackerman, Managing Director and Founder of Allegis Capital agreed to substantially increase his existing investment.

The financial details were not available, nor any sort of new capitalization table among the many investors in both companies. New Vine alone had at least nine major rounds of funding.

How the cap table and subsequent ownership percentages are finally sorted out will determine whether this is a merger or an acquisition.

SIMILAR PARTNER ROSTERS

Not coincidentally, IBG — like WTN –  brings to the table venture capital backing and a very similar team of partners including:

IBG HAS RECEIVED $10 TO $15 MILLION IN VENTURE CAPITAL SINCE FOUNDING

IBG went live on the Web on April 2, 2003, with Chameleon Cellars. Today, the IBG site lists approximately 225 wineries.

Founded by Wineshopper/wine.com veteran Paul Mabray, Inertia Beverage Group has raised $10 to $15 million since then. The largest round was an $8 million series B funding in April 2007 led by Allegis Capital and Sid R. Bass Associates.

Earlier fundings included established venture capital funds and  a number of small “angel” investments. Those participating in those rounds as investors and/or advisors included:

  • Advance Ventures
  • AVI Management Partners
  • Golden Gate Capital
  • BlackInc Ventures
  • Teifeld & Associates
  • Toktumi

ACQUISITION/MERGER FORGED UNDER PRESSURE

For six days, the existing investors conducted a speed-dating circus with potential suitors underneath a storm cloud of angry customers, unpaid employees and an exodus of New Vine customers.

Wine Industry Insight interviewed a wide range of laid-off employees, all of whom said they had already filed complaints with the Division of Labor Standards (DLSE) Enforcement of the California Department of Industrial Relations. The Oakland DLSE office confirmed a “large number” of complaints about New Vine.

Other employees said they were pooling their money  and searching for a class-action labor attorney.

Additional pressure was brought by the exodus of winery customers from New Vine that accelerated as vintners grew angrier and angrier about the inability to ship orders or to take possession of their wine.

AMAZON LURKED ALWAYS IN THE BACKGROUND

Amazon — with the contract rights and other ties to New Vine — was omnipresent in the proceedings. The mammoth Internet retailer had already gone “live” with a stealth version of its New Vine-based wine sales site which was being tested by those issued passwords. Those involved in that process said that only minor tweaks and content revisions remained before opening its doors to the cyber public.

Wine Industry Insight had no details on Amazon’s possible role in the merger/acquisition process at the time this article was being written Thursday night.

MORE DETAILS EMERGE ABOUT THE NEW VINE MELTDOWN

Knowledgeable sources say that the event precipitating the sudden shutdown of New Vine was a presentation by interim CEO Roy Kim who had been brought in by investors to give them an independent assessment of the company’s position.

In going over New Vine’s operations, Kim, the sources say, found substantial debts that were not on the company’s balance sheet. At that time, New Vine had been operating without a Chief Financial Officer for about two years, despite the fact that the company’s financial structure and cash flows are more complicated than the average company.

“ThomVest (the largest single investor) was not happy with the debt discovered by Roy Kim, so they shut it down,” said the source. “Kim then resigned because there was no saving the company with the newly uncovered debt.”

FORMAL ANNOUNCEMENT EXPECTED BY FRIDAY MORNING

A formal announcement was expected to be released by the morning of June 5.

Posted by lperdue on Jun 4th, 2009 and filed under Featured Articles. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

5 Responses for “Inertia Beverage Group Acquires/Merges With New Vine”

  1. Josh says:
    June 4, 2009 at 10:29 pm

    Hidden debt…

    One would think the management at NV could be held criminally liable…

    Thanks for your reporting on this again Lewis.

  2. With-held says:
    June 5, 2009 at 6:11 am

    Hopefully this will mean the employees will get paid. Since today is “pay-day” and the current employees didn’t get paid either, management has a lot of explaining to do. Howcome the interim CFO didn’t know about the hidden debt? Hmmm, lots of questions!

  3. Not-Saying says:
    June 5, 2009 at 8:43 am

    It is a shame that a company that portraid themselves as a “world class operation” pulled the rug from underneath their high profile customers and betrayed their employees by closing the doors without a warning and being told that, it was undertermined if they would get their last paycheck or not. Considering today’s economy, it is adding insult to injury. –It is unethical, irresposible and unacceptable.

  4. former finance employee says:
    June 5, 2009 at 9:02 am

    The “interim CFO” had full knowledge of the financial situation at New Vine. Nothing was hidden from the internal perspective. Criminal is an appropriate word when speaking of New Vine Logistics.

  5. Deep Wine says:
    June 5, 2009 at 9:43 am

    How is it that Carol Thompson, COO of New Vine, is not mentioned anywhere? Those within the company witnessed how she allowed operational blunders to repeatedly occur. She was also responsible for coming up with the action plan to close operation of New Vine - down to details of how the employees would be dimissed and how existing inventory would be released (or not).

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