Penfolds owner Treasury Wine Estates considering new takeover bid

The owner of Penfolds and Wolf Blass wines, Treasury Wine Estates, has given the strongest signal yet that it is considering selling its business, after receiving a higher bid from private equity group KKR.

Treasury said today (4 August) that it plans to open its financial accounts to allow the private equity team to conduct due diligence on its business.

The move came after KKR partnered with Rhone Capital to raise its initial takeover bid for Treasury by close to 11%, to A$5.2 per share in cash, which values the Australian wine business at A$3.4bn (US$3.2bn). The amount of extra funding promised by Rhone Capital was not disclosed.

Takeover speculation has surrounded Treasury for several years, but this is the first time its board, led by recently appointed chief executive Michael Clarke, has publicly appeared willing to entertain a specific bid.

‘The board, together with its advisers, has concluded that it is in the interests of its shareholders to engage further with KKR and Rhone,’ said Treasury.

Treasury’s share price rose by 4% on the Australian Stock Exchange, to A$5.15, following news of the fresh bid.

The higher bid ‘represents a more reasonable reflection of the potential value of Treasury Wines’, said Australia-based investment group Dalton Nicol Reid, a minority shareholder in Treasury.

It said that it expects Treasury to sell assets whoever is in charge, as the company attempts to improve profits and avoid further one-off charges related to excess wine stocks.

But, the investment house said it believes the Penfolds brand continues to hold strong value, and that Treasury’s wine stocks have strong profit potential over the medium-term.

Written by Chris Mercer