Direct Wines sells Virgin Wines in £16m buyout

The managing director of Laithwaites owner Direct Wines has said his company is not turning its back on the UK, after agreeing to sell its Virgin Wines business in the country.

Virgin Wines, which employs 160 people, is to be acquired in a management buyout valued at around £16m. Managing director Jay Wright and his team secured private equity funding for the deal from Mobeus and Connection Capital.

While both sides have said the time was right to make a break, the announcement has increased speculation on Direct Wines’ commitment to the UK at a time when wine consumption is stagnant and the sector’s profitability remains weak.

‘We believe that there is still growth potential in the UK market, but that we need to pursue a single goal and not two,’ Direct Wines’ managing director, Simon McMurtrie, told decanter.com. ‘We are increasing our investment in Laithwaite’s in the UK following the Virgin Wines sale.’

He added, ‘for Virgin to grow further, more investment is required. Jay has very clear ideas as to how he would like to grow the business. It is much better that new outside investors back him.’

Direct Wines, though, is also keen to invest more resources overseas, especially to build its presence in Australia and the US. Founder Tony Laithwaite has previously said that profit margins are significantly higher across the Atlantic and have the potential to drive growth.

‘These days, one third of our business comes from international and two thirds from the UK,’ said McMurtrie. ‘With the Virgin sale, short-term, the international share will be larger.’ He declined to speculate on the likely medium-and longer-term splits.

Written by Chris Mercer