News Column

Winemaker opens its books after sweeter offer

August 5, 2014

Josephine Moulds



The world's second-largest winemaker has opened takeover talks with private equity group KKR after receiving an improved A$3.4bn (pounds 1.87bn) bid for the business, whose brands include Wolf Blass and Penfolds.

Treasury Wine Estates, which rejected a A$3.1bn unsolicited offer from KKR and fellow buyout firm Rhone Capital in May, said the increase in the price meant it was now "in the interests of shareholders to engage further".

The move raises the prospect of a bidding contest for Treasury, which also owns the Beringer brand.

China'sBright Food Group, France'sPernod Ricard and the world's biggest winemaker, US-based Constellation Brands, are all considered potential buyers.

Shannon Rivkin, director at Rivkin Securities, told Reuters: "Absolutely there are [rival bidders], they've now set a starting point for the price. This is going to be the point now where anyone who has any interest will be able to have a look at the books as well."

The new offer is a 5% premium on Treasury's share price on Friday. Treasury's shares have fallen from an all-time high a year ago as it slashed earnings forecasts and suffered oversupply problems in its US arm and sluggish sales in China.

Treasury had a dreadful 2013, when profits slumped 38% in the six months to February. But the company is turning round its fortunes with a restructuring plan bolstered by Asia's growing appetite for wine and the value of the Penfolds label.

The winemaker stressed that it was providing KKR and Rhone with "non-exclusive" access to its books for due diligence and that there was no certainty any offer would be forthcoming.

Rivkin said KKR may take fright after looking at Treasury's books. "I think this is a starting bid. Once they have a look through, if there are any issues there that the market's not aware of they could still very easily walk away."

Treasury's woes reflect problems in the broader Australian wine industry, which has struggled with volatile market conditions and a high currency exchange rate in recent years.

Treasury - which posted sales of A$1.7bn in the 2013 financial year - has tried to stave off takeovers by cutting costs and installing a new chief executive, Michael Clarke, in April. His predecessor, David Dearie, was sacked in September last year after presiding over a A$160m charge following the destruction of thousands of gallons of cheap wine exported to the US.

An efficiency drive imposed by Clarke is expected to generate A$35m in savings in the 2015 financial year by shedding jobs and reducing office space, IT and non-essential spending.

38%

A bad 2013 saw Treasury's profits fall by 38% in the six months to February. It has now received a pounds 1.87bn bid for the business

Captions:

A Penfolds vineyard in South Australia. Treasury, like much of the Australian wine industry, has struggled with a volatile market Photograph: Milton Wordley/Getty



For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Guardian (UK)


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters