Penfolds owner Treasury Wine Estates has rejected a takoever offer from a private equity group that valued its wine business at around A$3bn (US$2.78bn).
Private equity group Kohl Kravis Roberts (KKR) has offered to buy Treasury for A$4.7 per share.
But, the news sent Treasury’s share price up by 18% on the Australian stock exchange today (20 May), to close the day ahead of the bid at A$4.8 per share.
It is the third time in a month that Treasury has to deal with market speculation about a possible sale, but this is the first time that it is known to have received a formal approach from a potential suitor.
KKR had requested confidentiality, but the Wolf Blass wine producer said it decided to go public over the bid after it discovered that the private equity firm had been canvassing for support among Treasury shareholders.
‘The board has considered the KKR proposal in the context of these renewed plans and concluded that the proposal does not reflect the fundamental value of the company and it is therefore not in the best interests of shareholder,’ Treasury said.
There have long been rumours that Treasury could look to sell all or part of its wine business. Speculation has intensified recently after the winemaker’s new chief executive, Michael Clarke, told analysts that he thinks the company has too many brands.
Treasury also had to accept tens of millions of dollars in charges in the US last year, in order to destroy an oversupply of wine that it was unable to sell there.
Recent weeks have seen reports of interest in the US business from Jacob’s Creek owner Pernod Ricard and Robert Mondavi owner Constellation Brands. But, Treasury has denied any approach and said last week that it intends to keep its US business.
Written by Chris Mercer