Tuesday, July 13, 2021

Burrowing Owl buys Wild Goose Vineyards

Photo: Left to right - Hagen Kruger, Chris Wyse, Alex Kruger, Kerri Wyse-McNolty, Roland Kruger, Jim Wyse and Nikolas Kruger
Burrowing Owl Estate Winery’s purchase of Wild Goose Vineyards unites two of the founding families of the British Columbia wine industry. The acquisition, which was announced on July 13, also concludes a bizarre period in which Wild Goose had to put itself in receivership in order to survive as one of the Okanagan’s best-loved wineries. The Kruger family, which operates Wild Goose, has lived in the valley since 1984 when the late Adolf Kruger purchased a vineyard site near Okanagan Falls for what became one of the early farmgate wineries. It now produces about 20,000 cases of wine a year and owns 40 acres of vineyards. The winery is managed by Adolf’s heirs: Roland, the general manager; his brother Hagen, the consulting winemaker; and Hagen’s sons, Nikolas, the winemaker, and Alex, a vineyard supervisor. Burrowing Owl, which produces about 50,000 cases a year, is operated by the Wyse family. It was founded in 1993 by Jim and Midge Wyse. His son, Chris, is now the president of Burrowing Owl. His daughter, Kerri Wyse-McNolty, is a winery executive. Based near Oliver, Burrowing Owl owns 210 acres of vineyards in the south Okanagan and the Similkameen Valley.
The Supreme Court of British Columbia accepted Burrowing Owl’s offer of $12.6 million for Wild Goose. The sum pays off both secured and unsecured creditors. “We are very excited about this acquisition,” Chris Wyse said in a news release. “We have been looking at various opportunities to grow our business over the past few years, and we feel that Wild Goose is a perfect fit for us.” There is almost no overlap between the portfolios of the wineries. Burrowing Owl is renowned primarily for its big red wines while Wild Goose has made its reputation with Riesling, Gew├╝rztraminer, Pinot Gris and Pinot Blanc. The stellar reputation of Wild Goose with consumer seems to have survived the receivership almost intact. “We appreciate the family heritage and history of Wild Goose, as well as … the strength of reputation and brand that the Kruger family has built since 1984,” Chris Wyse said.
The Wild Goose saga began after Adolf Kruger died in 2016, leaving his heirs with the task of rolling over the business. “The transition from Hagen and myself to our kids would have been extremely difficult and challenging,” Roland told me in a 2019 interview. “A lot of soul searching was done. A lot of tough decisions were made. We felt to move Wild Goose forward, we needed to find some partners to help grow the winery.” They engaged a mergers and acquisitions specialist and did extensive marketing of the company. In a March 15 affidavit filed in court, Roland said: “That marketing included distribution to a list of approximately 80 potential buyers throughout North America. … No American buyers expressed any interest.” A few Canadian producers looked at Wild Goose but none made offers. “Prospective wine industry purchasers expressed reservations about the winery’s focus principally on white wine varietals,” Roland wrote. However, a Vancouver developer, Portliving Group, which had just purchased three lakefront motels in Penticton, was interested in Wild Goose, offering $12.25 million which the Kruger family accepted in September 2019 since no one else had made an offer for the winery. Neither Portliving nor the winery ever disclosed that Wild Goose had been sold.
The deal was convoluted, involving staged payments to the Krugers. When Portliving suffered cost overruns and other problems with its development projects, the payment flow to the Krugers became erratic. The Krugers went to court in May, 2020, and secured an agreement which seemed to resolve issues between them and Portliving. By the end of 2020, Portliving again was in default to the Krugers. “It has concerned me,” Roland wrote in his March 15, 2021 affidavit, “that the owners of Wild Goose have withdrawn substantial amounts from Wild Goose’s line of credit for us outside of Wild Goose.”
Portliving’s alarming financial status is evident from an affidavit filed in May, 2020, by Tobi Reyes, the company’s principal, regarding the company’s efforts to restructure one of its Vancouver projects. He wrote: “If there were enforcement proceedings brought against me and/or Development Inc. on account of the Petitioner’s mortgages, that event would trigger defaults under a large number of other loans within the Port Capital Group, with an aggregate balance of over $400 million.” In March, 2021, the Krugers felt they had no choice but to petition in the winery into receivership, enabling the receiver to find a new buyer to restructure the finances. “Wild Goose now faces a cash flow crisis,” Roland said in his affidavit. “As a result of the Bank of Montreal freezing the line of credit, Wild Goose bounced payroll cheques and had to make payroll from a different account.” “This has been the most painful and stressful experience that we have ever experienced in our lives,” Roland said in an interview in April. “It is something that no one would ever want to go through.”
The Bowra Group, which managed the receivership, engaged a realtor to market the winery. A minimum, or “stalking horse” bid of $11.7 million was on the table from Suki Sekhon, one of the owners of Vanessa Vineyards who had earlier injected some cash into Wild Goose. Portliving’s Tobi Reyes, rejected that bid while trying to structure a new bid. But when the court-ordered period for selling the winery ended, the court accepted Burrowing Owl’s bid with its straight-forward terms and its commitment to pay off both secured and non-secured creditors. “We looked at first just at the strength of the business,” Chris Wyse said in an interview. “The business made sense. It’s profitable. We went a little deeper than looking at a few financial statements. We met with Roland; we toured the facility, we looked at how things were running. We surveyed the market to see how strong their products were. At the end of the day, everything was good. The only thing that was bad was the word, receivership, on the front cover of the marketing brochure.” Unlike wineries which had previously look at Wild Goose, Burrowing Owl was attracted, not deterred, by the strong portfolio of whites. “We are really attracted to their whites,” Chris says. “That is partly what attracted us to the whole program … having that strong white portfolio and maybe developing it some more. Perhaps we are zagging when everybody else is zigging, but we see a strong white producer and knowledge base.”
Burrowing Owl intends to keep Wild Goose’s staff in place. “We don’t really have any need to modify the staff in any way,” Chris says. “We think they have a good crew there running the business. We certainly hope to merge knowledge and talent. We hope they will all stay on and carry on what they are doing.” That includes Roland Kruger; his brother Hagen if he choses to come out of retirement; and Hagen’s sons. “We hope to keep the Kruger profile up front and centre as the family that runs the business,” Chris says “We have a lot of mutual respect for each other,” Roland says of the Wyse family. “They make some of the best wines in the province.”

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