Secretive Wine Billionaire’s ‘Old-Style’ Habits Blur Succession
Pierre Castel built a global wine and beer empire from a small trading outpost in Bordeaux, but who actually owns the business and what will happen after the 96-year-old dies?
(Bloomberg) -- Pierre Castel has always shunned mobile phones and computers, preferring to seal deals with his word and a handshake.
For his admirers, that’s emblematic of the old-fashioned way the 96-year-old former vineyard worker built a global wine, beer and soda empire, starting from a small trading outpost in Bordeaux.
But tax authorities in Switzerland, where Castel has lived for four decades in self-imposed exile from France, are less impressed. A Geneva court order demanding Castel pay about 415 million Swiss francs ($443 million) in back taxes and penalties for undeclared revenue and wealth became public in October, in a case that has exposed the byzantine workings of his empire.
As Castel appeals the decision, the legal wrangling is shedding rare light into the workings of one of Europe’s most secretive fortunes — the Bloomberg Billionaires Index estimates his family’s wealth as $5 billion based on known assets, but it is likely much more. Assertions made during the case about the ownership structure are also raising questions about the future of the group that is one of the world’s biggest wine traders, the second-largest beer brewer in Africa and the owner of a brand of ubiquitous wine stores across France, called Nicolas.
Representatives in France of Castel’s main units declined to comment on the group’s operations, and referred queries about the court case to his Geneva-based lawyer, Gregory Clerc, who said the founder has progressively retreated from the business.
For about seven decades, Castel has been the face of the closely held group that now has annual revenue of about 4.4 billion euros ($4.6 billion) and a global workforce of 32,000. Over his very long career, he hobnobbed with those in power — French presidents Jacques Chirac, Nicolas Sarkozy and Francois Hollande, as well as leaders across Africa. But there’s little, if any, information about how his vast organization is run, its ownership and who would take over from him — at least four of his nephews have key roles at the top of the group, and he also has a daughter.
“The way Pierre Castel has organized his companies certainly isn’t transparent, but this is not unusual,” said Philippe Pele-Clamour, adjunct professor at business school HEC Paris. “It was created by a man who built everything from scratch and wanted to retain control. Pierre Castel is the type of company founder who will likely die at the helm.”
But at the heart of Castel’s battle with the Swiss tax authorities is his claim that the empire he built is not his alone, but a family enterprise started as a produce and wine business by him and four of his eight siblings in 1949. Castel’s lawyers argued that he has extricated himself from operations over the years and that in 1992, largely removed himself from the ownership of the group. They said his share of the proceeds of the group was less than a fifth, with the rest going to four other branches of the family, and that his title of chairman at the time was merely for commercial purposes to reassure partners and ward off competitors.
His aversion to written agreements, favoring “old-style management” practices of handshakes and talk, however, meant his assertions weren’t always backed up with documents, and the Swiss court ruled against him for lack of proof. The only evidence provided of a 1992 change in ownership structure were the minutes of a July 12 meeting on the creation of a foundation in Liechtenstein.
The revelations have engendered uncertainty about how the various branches of the family will interact after the passing of its founder, and whether a sale would be possible. It was to prevent “conflict within the family,” ensure its survival and provide a “barrier against potential acquirers” that companies within the group were moved into an independent entity in Liechtenstein and then a Singapore trust, Castel’s lawyers told Swiss courts. People familiar with Castel’s thinking say his succession plan was prepared many years ago and that his deep desire is for the group to remain family-owned and independent — exactly the way it began.
Castel, the son of Spanish immigrants, had his first whiff of the wine business as a child. He was born in the southwestern French village of Berson, and left school at age 11 to work in a vineyard near Bordeaux alongside his father, Santiago. Some years later, he and his siblings started Castel Freres, the wine branch that’s now run by the sons of his late brother Angel and is a 1.2 billion-euro operation.
Built with a calculated effort to bring to market affordable brands such as Vieux Papes, it targets the less-than-$10 segment and sells about 500 million bottles of wine a year globally, according to its website, equivalent to about 8% of France’s total annual output. Its wines, often produced mixing grapes from different European countries, are sold in four-packs, bag-in boxes or bottles. The group’s bestselling Bordeaux is named Baron de Lestac, an anagram of Castel, and its North African brand, Sidi Brahim, is frequently served in France’s couscous restaurants.
Castel Freres has at least 20 wine-growing properties in France with more than 1,000 hectares, or 2,471 acres, of vines. It also has some 500 Nicolas wine stores across the country, and is expanding this year with the planned acquisition of online alcohol distributor Vinatis.
The group’s real money maker, however, is its larger beer and soda branch spread across more than a dozen African countries. By entering the market in the early 1950s, Castel managed to get the pioneer’s edge and has a quasi-monopoly in several countries, where his group is among the biggest employers. The business was built through a mixture of privatized, acquired and newly built breweries that produce and distribute dozens of popular local brands such as Castel, Bock and Asso.
The Africa business — spearheaded by sons of Castel’s late sister Pilar — has a longstanding venture with Anheuser-Busch InBev SA, which highlighted the region’s beer market as a source of growth in its latest earnings report. Until recently, the Castel group was also a major Coca-Cola Co. bottler. In July, it acquired Diageo Plc’s Guinness business in Cameroon for £389 million ($477 million). It also recently bought out its partner in the Somdiaa African agriculture business. An organization backed by actor George Clooney alleged last year that a Castel unit made a pact to protect its sugar operations with a militia linked to atrocities in the Central African Republic, something France is probing and the group denies.
Castel-related companies also have sizable commercial real estate holdings in Spain and Portugal. Over the past decade, Zambal Spain Socimi SA has assembled a portfolio worth 1.1 billion euros — mostly office buildings in Madrid — “without bank financing,” according to its website.
Already, the wine and beer businesses are run as separate entities by different branches of the family, people close to the group say, describing a decentralized structure with no organizational chart. Over the years, the group’s ever-expanding corporate structures have shifted locations, including to Switzerland and Gibraltar, Liechtenstein and Singapore. Swiss authorities, whose probe began in 2017 on suspicions that Castel was in possession of an undeclared fortune, cited media reports that put him at the helm of a sprawling network of more than 215 companies in 40 countries that they said wasn’t reflected in his tax filings.
Castel, described by Challenges magazine as France’s wealthiest tax exile, moved to Switzerland shortly after Francois Mitterrand was elected the country’s first Socialist president in 1981. In a rare interview years later, Castel said that France was “dangerous, both financially and economically” and that tax rates of more than 50% were unacceptable.
Until five years ago, about the only information the group published was promotional material for the dozens of brands of wine, beer and drinks sold around the world. In response to a French law, it began publishing an annual report in 2018 for Copagef, a holding company now housed on one sparsely furnished floor of a nondescript building in the chic 8th arrondissement of Paris, where only a handful of people work.
Copagef groups together the wine, African drinks and Somdiaa agriculture businesses. The 2019 edition still carried an introduction by Castel as chairman. He was replaced by Guy de Clercq, a long-time top lieutenant, in this year’s report. In yet another twist, the company said in a Nov. 6 filing that it plans to be taken over by Luxembourg-based DF Holding, another Castel entity.
While his group remains largely obscure, even less is known about Castel the man. A keen skier, Castel in 2010 married Francoise, his long-time partner, now deceased. They have a daughter, Romy, who was born in 1974, lives in Switzerland and owns Chateau Cavalier, a vineyard in the south of France specializing in rose wines, according to a filing.
Asked about the future of the group, his lawyer Clerc said Castel has made a determined effort to ensure its continuity.
“It is common for assets to be placed in a trust in anticipation of death in order to protect the estate from future generations,” he said.
--With assistance from .
(Adds African beer market detail in 15th paragraph.)
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