The board of Australian winery Evans & Tate today rejected the Yarraman Winery merger bid.

The figures did not stack up, Evans & Tate said in an announcement to the Australian Stock Exchange.

‘The Board did not consider that satisfactory evidence of Yarraman having secured debt and equity sufficient to complete their proposed transaction had been provided. In these circumstances, the Board of Evans & Tate has resolved today to terminate the agreement with Yarraman.’

On 20 February Evans & Tate – which is heavily indebted – had provisionally agreed to merge with Yarraman subject to an audit of Yarraman’s finances.

Yarraman is based in the Hunter Valley but is a subsidiary of Yarraman Winery Inc, an American company based in Nevada.

In particular the Margaret River-based Evans & Tate wanted to know how Yarraman – which is also indebted – could obtain the necessary capital to finance the merger.

Evans & Tate’s latest results for the half-year to 31 December 2006 underline how financially fragile the company remains.

Although the trading loss has been slashed to AU$6.74m (£2.74m) from AU$44.4 (£18.1m) over the same period in 2005, its debts exceed its assets by AU$74.4m (£30.3m).

Evans & Tate owes its bankers, ANZ, AU$97m (£39.5m). In this latest report Evans & Tate’s accountants warn of ‘material uncertainty regarding continuation as a going concern’.

Yarraman was looking to the merger with Evans & Tate to ease its own financial troubles. Its latest trading report announced ‘we are currently in discussions with potential acquisition candidates that will significantly improve our operating results and working capital.’

Evans & Tate said it would immediately resume work on any other proposals – but Yarraman maintains its proposed merger is best for all parties.

‘Yarraman remains committed to the merger proposal made to Evans & Tate and

continues to maintain a positive level of communication with the board and

management of Evans & Tate,’ it said.

It added that it would report to its debt and equity financiers and ‘submit its complete and final offer’ to Evans & Tate in due course.

Written by Jim Budd