CRIMSON WINE GROUP LTD CWGL
April 07, 2020 - 12:42pm EST by
cuyler1903
2020 2021
Price: 5.33 EPS 0 0
Shares Out. (in M): 23 P/E 0 0
Market Cap (in $M): 123 P/FCF 0 0
Net Debt (in $M): -1 EBIT 0 0
TEV ($): 122 TEV/EBIT 0 0

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Description

Based in Napa, CA, Crimson Wine Group, Ltd. (“CWGL”) is an owner and operator of boutique, estate-based wineries that produce in the finest wine growing regions of California, Oregon and Washington.  The company’s wineries include Pine Ridge Vineyards, Seghesio Family Vineyards, Archery Summit Winery, Chamisal Vineyards, Double Canyon Vineyards and Seven Hills Winery.  Founded in 1991, CWGL was for years a division of well-known conglomerate Leucadia National Corporation (NYSE: LUK).  In 2013, in conjunction with Leucadia’s acquisition of investment banking firm Jefferies LLC, LUK leadership Joseph Steinberg and Ian Cumming believed value would be better realized for LUK shareholders through a tax-free spin-off of CWGL to LUK shareholders, which was completed in February of that year when LUK common shareholders received one share of CWGL for every ten shares of LUK owned. 

This idea has been written up 3 times in past years on VIC, including by me, at higher prices.  Timing may be better now given the recent crisis, and as in the past, this stock is best suited for individual investors given the illiquidity.

I see four reasons to consider the stock here:

1)  Substantial insider buying in 2020 from both Joe Steinberg and John Cumming through pre-arranged 10b5-1 plans, at prices as much as 45% above the current bid.  In addition, the Chief Winemaker & COO made small personal purchases as recently as March 23rd.

2)  The stock is trading at the lowest price it has seen since becoming independent of Jefferies.

3)  With a tangible book value per share of $8.32, the stock has 56% upside to tangible book.  Again, Pine Ridge was purchased in 1991 and real estate prices in California are dramatically higher today. 

4)  Plenty of liquidity, with $19mm of the company's $22mm of term loans due 4+ years away.

I suspect that the private market value here would be maximized in a sale to a third party.  Steinberg & Cumming have been purchasing the stock in recent years, and aggressively purchased shares as high as $9.73 in 2018 according to the records at my disposal.  There is presently 83% upside to that $9.73 price, which would still only be a small premium to tangible book.

Recent insider transactions:

            
QUILLE NICOLAS MICHEL ERIC
Chief Winemaking & COO
2020-03-23 Buy 1,000 0 1,000 $5.15 - $0.01M 2,000 100.00%  
STEINBERG JOSEPH S
Director
2020-01-28 Planned Buy 1,900 0 1,900 $7.54 - $0.01M 2,662,672 0.07%  
STEINBERG JOSEPH S
Director
2020-01-24 Planned Buy 2,043 0 2,043 $7.57 - $0.02M 2,660,772 0.08%  
CUMMING JOHN D.
Director
2020-01-24 Planned Buy 200 0 200 $7.57 - $0.00M 308,207 0.06%  
STEINBERG JOSEPH S
Director
2020-01-23 Planned Buy 6,760 0 6,760 $7.75 - $0.05M 2,658,729 0.25%  
CUMMING JOHN D.
Director
2020-01-22 Planned Buy 1,630 0 1,630 $7.84 - $0.01M 308,007 0.53%  
STEINBERG JOSEPH S
Director
2020-01-17 Planned Buy 1,956 0 1,956 $7.64 - $0.01M 2,651,969 0.07%  
CUMMING JOHN D.
Director
2020-01-17 Planned Buy 1,499 0 1,499 $7.59 - $0.01M 306,377 0.49%  
CUMMING JOHN D.
Director
2020-01-15 Planned Buy 9,160 0 9,160 $7.38 - $0.07M 304,878 3.10%  
STEINBERG JOSEPH S
Director
2020-01-15 Planned Buy 8,652 0 8,652 $7.38 - $0.06M 2,650,013 0.33%  
STEINBERG JOSEPH S
Director
2020-01-10 Planned Buy 6,070 0 6,070 $7.19 - $0.04M 2,641,361 0.23%  
CUMMING JOHN D.
Director
2020-01-10 Planned Buy 6,277 0 6,277 $7.19 - $0.05M 295,718 2.17%  
CUMMING JOHN D.
Director
2020-01-08 Planned Buy 8,363 0 8,363 $7.23 - $0.06M 289,441 2.98%  
STEINBERG JOSEPH S
Director
2020-01-08 Planned Buy 8,275 0 8,275 $7.23 - $0.06M 2,635,291 0.31%  
STEINBERG JOSEPH S
Director
2020-01-03 Planned Buy 8,620 0 8,620 $7.36 - $0.06M 2,627,016 0.33%  

Disclaimer:  The author of this idea presently has a long position in securities of this issuer and may trade in and out of these positions without notice.  The data contained herein are prepared by the author from publicly available sources and the author's independent research and estimates.  No representation or warranty is made as to the accuracy of the data or opinions contained herein.  Please do your own research.

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

- Sale of the company
- Investor awareness
- Time/price

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