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Vintage Wine Estates readies their SPAC-tacular public offering

NOTE: This was originally published as a premium, Wine Executive News article and redacted for Wine Industry Insight. This is the complete version. Many web links are live only for premium subscribers who may scroll to bottom for their logins.

By Lewis Perdue
Publisher, Executive Editor, Wine Industry Insight

In December 2020, a $360 million cannabis-oriented Canadian (SPAC) sponsored by a combination of US and London-based executives had looked at (and rejected) more than 100 companies. As the game clock ran down toward the SPAC equivalent of a two-minute warning, the team realized it needed a smart new strategy to sign a quality acquisition agreement.

South of the border, Pat Roney, CEO/founder of a profitable and expanding Napa/Sonoma company with $220 million in annual revenues, was reluctantly considering a traditional IPO, but wanted more funds than would be available via that path to swiftly continue a successful 20-year record of acquisitions. Time was running out on grabbing the choicest buys among the half of American winery owners who were in a selling mood.

Then synchronicity happened. This is how.

California-based Vintage Wine Estates is now swiftly closing in on a $690 million (ESG) SPAC offering. This because — like a savvy quarterback looking at the two-minute warning — top management at British Columbia-based  Bespoke Capital Acquisition Corp. (BCAC) recognized the late-game opportunity to change strategy.


The Players

Vintage Wine Estates is a profitable company that ranks among the top 15 U.S. wine producers with more than 50 brands and wineries in Napa and Sonoma counties as well as those in California’s Central Coast, Oregon, and Washington State.

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Bespoke Capital Acquisition Corp. (BCAC) is a Canadian (British Columbia) Special Purpose Acquisition Corporation (SPAC). BCAC was incorporated by its parent company, London & U.S.-based Bespoke Capital Partners in 2019 with the original goal of locating and merging with a suitable cannabis company.

Bespoke has a previous successful investment in wine (Vinventions), and a team of operating partners with deep expertise in leisure, travel, and entertainment. The SPAC team also including Paul Walsh, the former CEO of Diageo — Chairman of BCAC and set to be Chairman of the merger company.

The Game-Over results

According to a  Feb. 5, SEC Form 425 filing news release, VWE’s public offering on NASDAQ will come via merger with BCAC., whose Class A Restricted Voting shares began trading on NASDAQ (BSPE) on Feb. 8.

The merger process — announced on Feb. 4, —  is currently awaiting the approval of a formidable, 172-page merger transaction agreement currently being considered by current stockholders of both BCAC and Vintage Wine Estates.

Once the merger agreement (anticipated in the second quarter of this year) is approved, both Bespoke Capital Acquisition Corp. and Vintage Wine Estates business entities will cease to exist and will form a new Nevada-domiciled corporation: Vintage Wine Estates, Inc.

The merger transaction approval will result in an S-4 filing with the U.S. Securities and Exchange Commission. After the S-4 is approved by the SEC, Vintage Wine Estates will trade on NASDAQ as “VWE.”

Dual listings for stock and warrants on U.S. and Canadian exchanges

The merger is expected to provide VWE with more than $300 million in new capital. The original stockholders of the original Vintage Wine Estates will own 39% of the new public company.

According to the Bespoke Capital Acquisition Corp SPAC filing, Bespoke’s shares began trading on the Nasdaq on Monday, February 8, 2021 under the symbol ‘BSPE.’ In addition,

“Bespoke’s Warrants will continue to trade OTC in the U.S. Bespoke’s Class A Shares and warrants will remain listed on the Toronto Stock Exchange under its current symbols….”

“Upon closing, the combined company will be named Vintage Wine Estates, Inc. Its common stock will remain listed on the Nasdaq Global Market under new ticker symbol “VWE” and on the TSX under the symbol “VWE.U”. The warrants remain listed on the TSX under “VWE.WT.U”. In the U.S., the warrants will either be listed on the Nasdaq or continue to trade OTC.”

The need for speed: Bespoke’s swift round-about pivot from Canadian Cannabis to California Wine

The SPAC intended to carry VWE to its public status was born on the Toronto Stock Exchange on July 17, 2019 with a preliminary prospectus announcing its intention to raise US$350 million in order to merge with a cannabis company. That was followed by a Final Prospectus on August 9, 2019.

In an astonishing five days, the entire US$350 million offering was completed on August 15. On September 13, Bespoke announced that it had exercised and closed on an over-allotment option, thus adding another US$10 million to the funds raised.

How did Bespoke end up in the United States? Good judgment and pot froth

The turning point for both the Bespoke SPAC and Vintage Wine Estates came because the Bespoke SPAC — which despite a stellar offering in Toronto —  could not find a suitable cannabis company to buy.

Generally, a SPAC must acquire a company within a certain time period (often two years) or return investor funds still held in trust. In the case of the Bespoke SPAC, the “permitted timeline” was 18 months beginning with the closing date of the offering or,  according to Bespoke’s SPAC prospectus, “21 months from the Closing Date if we have executed a definitive agreement for a qualifying acquisition within 18 months from the Closing but have not completed the qualifying acquisition within such 18-month period.”

A Vancouver private equity firm partner told Wine industry Insight: “Cannabis investments were growing extremely frothy in that time period,” the investor said. “Most of the good ones were already taken. I made my moves rather early and grew increasingly skeptical at the prospects of companies putting themselves into the financial game at that time. It’s a good sign that these boys [Bespoke] stayed calm and didn’t get spooked by their impending deadline.”

Both VWE CEO Pat Roney and Bespoke board member Mark Harms were more diplomatic and told WII that the cannabis market had grown “complicated.”

Bespoke foreshadowed the Vintage Wine Estates deal in a December 16, 2020 statement that alerted investors that cannabis was no longer on the acquisition table:

“Given the substantial changes in the federally legalized cannabis markets in North America and Europe and associated equity market volatility, the Company announced that it has broadened its acquisition search beyond the scope of cannabis and that it is engaged in substantive discussions with prospective targets in the alcoholic beverage and consumer products sectors. This is a natural extension for BCAC as its principals have extensive experience operating in these sectors.”

On February 4, 2021 — 11 days before the permitted timeline expired — Bespoke Capital Acquisition Corp. filed an SEC material change report  announcing that the SPAC had signed a “definitive transaction agreement” to merge with Vintage Wine Estates. The report noted that, due to the permitted timeline,  the merger completion had an “outside date” of May 15 for completion.

According to the report, final approval is expected at the BCAC Shareholders’ Meeting to be held “on or about April 30, 2021.”

Acquisitions baked into VWE’s DNA

VWE CEO Roney is not shy about the place of acquisitions and the need for additional capital in his overall strategy.

According to comments Roney made in a recent Rabobank podcast (free, live link): 

“We believe we’ve been the most acquisitive wine company in the wine business over last 10 years having done 20 acquisitions in the space. We continue to believe there’s a lot more opportunity for Vintage Wine Estates to make acquisitions as well as grow organically.”

Aggressive search for capital & SPAC target

Roney said he has been particularly aggressive in the past year or so but was reluctantly resigned to a traditional IPO:

“I prefered a SPACs because they offer greater transparency…are a lot more efficient, have with fewer layers of bureaucracy and are a lot less hassle in general.”

Roney’s relentless efforts raised his visibility in financial circles — something that one of the Bespoke SPAC underwriters heard and acted

“We were introduced [to Bespoke] through Citibank,” said Roney. “It was very fortunate given how little time they had left [on their permitted timeline].

Citigroup Global Markets Canada Inc. and Canaccord Genuity Corp. are the underwriters of the Bespoke SPAC.

According to this Bespoke news release, the offering closed on August 15, 2019, which means that the 18-month permitted timeline deadline to sign a deal would have been this February 15.

“It was fortunate for us since Mark Harms and his Bespoke team really understood the industry and having Paul Walsh on Board gives us even more credibility.

“They totally got our roll-up strategy. We were able to negotiate favorable terms that work for both of us.”

Mark Harms, Managing Partner at BCAC added:

“We broadened our search last summer [2020] and met Pat, negotiated a deal in the fall and were in a position to sign just after Thanksgiving. But wanted to get all of the paperwork done, and advance the audits, which are almost done.”

Harms said that work held up the S-4 filing which should take place the week of March 7.

Strategy change based on financial standards

Harms indicated that the change in merger target from cannabis to Vintage Wine Estates during the final months of  the permitted timeline came about because of VWE’s financial benchmarks.

In an email to Wine Industry Insight, Harms said the valuation of VWE relative to comparable companies was a compelling part of their decision. Referring to their Investor Presentation, Harms noted that Vintage Wine Estates:

“is trading on a pro forma basis at a c 21x Price/Earnings (P/E) ratio based on next year’s earnings. [This contrasts with] comparable companies including Boston Beer, Brown Forman, Constellation, Jose Cuervo; Bellring, Fever-Tree, Monster, Simply Good and Utz trading at a 30+x P/E.

Harms also pointed out that:

“[M]any investors also focus on cash flow. [VWE shows] than 13x Enterprise Value/EBITDA, versus 19-22+x for the comparable companies. [We believe], the valuation is compelling.]”

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Diageo Veteran Paul Walsh + financial expertise a vital part of the transaction

“For us, this wasn’t just your run-of-the-mill SPAC,” Roney told Wine Industry Insight. “What we got was collegiality along with world-class wine industry experience and ready access to financial advice and resources.”

Roney expanded on that during an investors’ presentation and conference call on February 4, Rone said,

I’m particularly excited to have Paul Walsh join our Board as Chairman. For those of you who don’t know him, and because he’s too humble to tell you himself, Paul has a remarkable track record at creating value, including his 13-year tenure at Diageo where he and the management team increased shareholder value by over $80 billion during that timeframe.”


Roney — who will be CEO of the merged company with Walsh as Chairman — said:

“Diageo’s team created value by a combination of organic growth, driven by innovation and premiumization, and selected acquisitions, both small and large. We have taken a page from Paul’s playbook in building VWE. Moreover, Paul has a tremendous wealth of knowledge and a robust rolodex of industry contacts that will serve us well as we continue to scale and consolidate this highly-fragmented industry.

Finance expertise

“Beyond Paul, the entire Bespoke Management Team, including [board members] Mark Harms and Rob Berner, provide a deep knowledge of the wine industry via their investment in Vinventions, one of the world’s largest wine closure companies; considerable financing M&A expertise; and a complementary understanding of the broader consumer staples space that could have taken them elsewhere, but they elected to partner with us, and we couldn’t be happier about it.”

Roney determined not to follow the bad examples of previous public wine companies

The past 25 years of public wine companies is littered with the debris of devalued icons and a plonk-soaked race to the bottom. Among the more prominent wine IPOs and brand acquisition disasters — Constellation, Mondavi, Beringer, Treasury — lay the wreckage of globally ranked cult brands and consumer favorites that are now extinct or simply bottom shelf supermarket plonk in cheap glass and plastic.

These fallen idols include once world class wines such as Matanzas Creek and Arrowood along with names like Mondavi and Beringer whose brand values have been fatally wounded by $4.99 wines carrying their famous name.
Beringer learned the hard way that it was not going to sell very many $100 bottles of reserve Cabernet after becoming the world’s largest source of White Zinfandel. Treasury still hasn’t figured out what to do with either Beringer or the dead weight of other bargain bottles. Gallo, which seems to suck up every available brand, can’t buy them all — or assimilate them.
Roney told the Rabobank podcast that Vintage Wine Estates has a proven strategy of avoiding those mistakes.
“A sense of place in a consumer-facing product front is important to us. Every one of our wineries has their own wine maker and then they’ve got their own grape sources and supplies.
“The farther you go up in the retail chain —  the $20 plus — more of that works for the winery and tasting rooms and sometimes  we keep the current owners of the wineries involved.
“We want to make sure sure that we have a consistent message to all of our consumers about the uniqueness of the various brands.
“And where we can consolidate in value price category the $10 to $15 are not quite as important. Nobody really cares about where the wine gets bottled.”

Froth, supply, and too many companies gone to pot

A sampling of articles on Canadian cannabis stocks

  • 1 Big Problem With Canadian Marijuana Stocks
  • Too high? Hedge funds unimpressed by Canadian cannabis stocks’ rally
  • Marijuana investors may lose 90% of their money in Canada, so consider the really big prize elsewhere
  • Too much weed: Canadian cannabis producers are sitting on a mountain of inventory, and it’s making some industry watchers nervous
  • Are Any Marijuana Stocks Good Buys Amid March Cooldown?

A quick look at the order of events can be found in the following series of links:

  • Jul 17, 2019 — Bespoke Capital Acquisition Corp. (BCAC) Files Preliminary Prospectus for U.S.$350,000,000 Initial Public Offering
  • Aug 09, 2019 –Bespoke Capital Acquisition Corp. Files Final Prospectus for U.S. $350,000,000 Initial Public Offering
  • Aug 15, 2019 — Bespoke Capital Acquisition Corp. Announces Completion of U.S. $350,000,000 Initial Public Offering
  • Sep 13, 2019 — Bespoke Capital Acquisition Corp. Announces Exercise and Closing of Over-Allotment Option 
  • Nov 13, 2020 — Bespoke Capital Acquisition Corp. Reports Third Quarter 2020 Financial Results
  • Dec 18, 2020 — Bespoke Capital Acquisition Corp. Provides Updates Concerning Acquisition Focus
  • February 8, 2021 — Bespoke Capital Acquisition Corp. Announces Listing on Nasdaq under the symbol BSPE

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