Treasury wine saga goes on

Treasury Wine Estates owns 80 brands and produces household names such as Penfolds, Rosemount, Lindeman and Wolf Blass. It is worth around Aus$3.4bn
Treasury Wine Estates owns 80 brands and produces household names such as Penfolds, Rosemount, Lindeman and Wolf Blass. It is worth around Aus$3.4bn

Helen Coburn examines the likely future fate of Treasury Wine Estates

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16 September 2014 | 0

Australia’s Treasury Wine Estates may be in sight of a saviour. Since being detached from Foster’s in 2011, its solo run has been decidedly bumpy. Hit by sales falls in China, the rise of the Australian dollar and, most notoriously, by having to destroy a huge glut of outdated wine stock in the USA, it’s seemed for a while that a well heeled buyer could emerge.

Right now, the predators seem to be private equity firms rather than drinks companies and, at the time of writing, something of a bidding war appeared to have developed between Kohlberg Kravis Roberts/Rhone and TPG Capital, with shares valued at around Aus$5.20 per share. That puts a worth of around Aus$3.4bn on the entire company, which owns 80 brands and produces household names such as Penfolds, Rosemount, Lindeman and Wolf Blass. Other equity outfits are also rumoured to have been circling, apparently giving the lie to market watchers who expected approaches from drinks conglomerates such as Pernod or Constellation.

Treasury, which employs 3,500 people worldwide and sells more than 32 million cases of wine, is understood to have written off around Aus$260 to cover poorly performing assets and falling sales, especially in the budget wine sector. A big and expensive marketing drive was launched last April. At present, bidders are believed to be carrying out due diligence on a non-exclusive basis. At the time of writing, it was by no means certain that Treasury would accept any of the offers. Some observers suspect that it will hold out for a higher price, or settle for a restructuring, probably by putting its luxury labels into a separate sales unit from the workaday brands, as well as by radically cutting costs.

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