Australia's Treasury Wines receives competing buyout offer

TWE said in a regulatory filing that it had been approached by "another global private equity investor" that was willing to acquire all shares in the company at A$5.20 apiece in cash by way of a scheme of arrangement. The investor - understood to be TPG - will be allowed to conduct non-exclusive due diligence, subject to negotiating a confidentiality agreement.

As of early afternoon trading in Australia, TWE stock had gained 3.5% to reach A$5.31.

The company was initially subject to a bid of A$4.70 per share from KKR in April. The board rejected the offer, saying it didn't reflect the full value of the company. KKR returned with a revised offer in partnership with Rhône. The bid of A$5.20 represents a 40.9% premium to TWE's closing price on April 16, the day before KKR made its original proposal.

A number of strategic players have also been linked to TWE - owner of brands such as Penfolds, Rosemount Estate and Wolf Blass - including China's Bright Food Group, French wine giant Pernod Ricard and US-based Constellation Brands.

Bids will be assessed on whether they deliver a value proposition superior to the expected benefits from TWE's current plan to increase consumer marketing investment in the company's brands, drive efficiencies and improve the cost base, and address structural opportunities for mid-tier brands (priced at A$5-10 per bottle) as well as seek organic expansion for the existing higher-end portfolio.

With roots that go back to the establishment of Penfolds in the mid-1840s and the founding of Beringer Vineyards in 1876, TWE claims to be the world's largest pure-play listed wine company with more than 80 brands in its portfolio. It owns 11,000 hectares of vineyards, employs 3,500 staff across 16 countries and sells 32 million cases of wine per year.

The business was consolidated by Foster's in the mid-1990s and early 2000s and then spun off by its parent in 2011, prompting interest from several private equity suitors. Cerberus Capital Management had a $2.5 billion bid rejected and the company was subsequently taken public.

TWE reported a net profit of A$42.3 million in the 2013 financial year, down 52.9% year-on-year, while revenue increased by 4.8% to reach A$1.76 billion. The weak performance was largely due to a scaling back of US inventory, incurring a pre-tax material item expense of A$154.2 million, and slower sales in China.

Net profit for the first half of the 2014 came to A$106.2 million, up 103.1% year-on-year, due to a one-off income tax benefit. The company scaled back its full-year EBITS projection to A$190-210 million from the previously stated A$230-250 million. Its share price is down from an all-time high of A$6.43 a year ago.

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• Topics
• Buyouts
• Australasia
• Consumer
• Buyout
• Australia
• Consumer
• buyout
• TPG Capital
• KKR