Chalone, Rothschild Plan to Invest in Each Other

Chalone Inc. of San Francisco, one of America’s few publicly held winery companies, and Domaines Barons de Rothschild of France announced Thursday a joint investment venture between the companies in which they would acquire 6% of each other’s stock.

The announcement was made at a San Francisco news conference by W. Philip Woodward, president of Chalone, and Baron Eric de Rothschild, managing director the Domaines Barons de Rothschild, which includes Chateau Lafite Rothschild, the famed First Growth wine of Bordeaux.

The parties said they expect the cross-ownership of the companies to rise to 20% within about two years. Each company initially is to invest about $3 million in the other. If all contemplated investments are completed, the exchange will total about $15 million, said a spokesman for Hambrecht & Quist, the San Francisco investment banking house that took Chalone Inc. public in 1985.

Largest Shareholder

The agreement also calls for Chalone Inc. to market some of the wines of the Domaines in the United States and for the Domaines to market some of Chalone’s wines in France.

The effect of the cross-investment to the investor is that “a public investor now has an opportunity to invest in the Rothschild wine business via an investment in Chalone,” said Jean-Michel Valette, a principal with Hambrecht & Quist, which initiated and consulted on the deal.

William Hambrecht, president and co-chief executive of Hambrecht & Quist, is the largest individual holder in Chalone, with more than 8% of Chalone’s stock.

Went Public in May

Valette said an investment in Chalone could be attractive to investors in some areas of the country where the Rothschild wines, notably Chateau Lafite Rothschild, are not widely distributed. Such wines are typically made available to investors.

Domaines Barons de Rothschild, headquartered in Paris, owns and operates Chateau Rieussec, Chateau Duhart-Milon and Chateau La Cardonne, and is the general manager of Chateau Lafite Rothschild.

Chalone owns and operates the famed Chalone Vineyard in Monterey County as well as Acacia Winery in the Napa Valley, Carmenet in Sonoma County and is the managing joint venture partner in Edna Valley Vineyard in San Luis Obispo County.

Chalone Inc. went public in May 1985 at $8 a share and since has traded in a range as high as $11.50 and as low as $5.75. Trading in Chalone stock was halted Thursday pending the announcement. Before trading was suspended, 14,400 shares were traded and the stock closed at $9.875, off 37.5 cents.