Penfolds takeover bids scuttled
Australia’s largest winemaker Treasury Wine Estates (TWE) has rejected takeover bids from two global private equity firms, saying they undervalued the company.
The decision sparked a sell-off of TWE shares, plunging 15 per cent in morning trade.
Treasury, which owns Penfolds, Wolf Blass and a host of other prominent labels, has ended discussions with Kohlberg Kravis Roberts and a rival bidder, believed to be TPG.
The two firms put forward $5.20-a-share offers that valued Treasury at almost $3.4 billion.
TWE’s board said the offers undervalued the company.
Treasury said the bidders are not able to support a transaction on terms and at a price acceptable to the board.
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“Accordingly all discussions have now ceased,” the company said in a statement to the stock exchange today.
“Over the past month the board and management held discussions with shareholders holding in aggregate approximately 50 per cent of the company’s shares.
“These discussions provided a forum for these shareholders to express a view on the proposals, with clear feedback from almost every one of these shareholders indicating that they believed a price of $5.20 per share undervalued the company.”
TWE’s Chairman Paul Rayner said: “The board’s focus continues to be to act in the best interests of all shareholders.
“Following the receipt of the initial, indicative proposals from the two parties, we believed it was in shareholders’ best interests to grant those parties the opportunity to conduct non-exclusive due diligence.
“That process has now concluded and the board is confident in the strategic plans to grow the company and is looking forward to working with management to deliver value to its shareholders.”
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TWE said its shareholders were confident it would benefit from strategy changes to accelerate consumer marketing investment, change Penfolds release dates, cut overheads and take a greater focus on the company’s priority brands.
“Year-to-date performance is tracking ahead of plan and TWE will provide shareholders with an update on the company’s strategic road map and performance at its next annual general meeting.”
Treasury’s shares were 72 cents, or 14.6 per cent, lower at $4.20 by 1125 AEST on Monday after the stock came out of a trading halt.
Chief executive Michael Clarke told analysts and reporters he did not think that either of the suitors would return with fresh proposals.
“I think it’s over is my point of view,” Mr Clarke said.
It has been a tough couple of years for Treasury shareholders, with the share price falling from a high of $6.47 in May 2013 to as low as $3.49 this May, prior to the takeover bids being announced.
Treasury suffered a $110.9 million loss for the 2013/14 financial year following a turbulent 12 months that included senior management changes, a major restructure and the costly destruction of hundreds of thousands of cases of excess wine.
But Mr Clarke has said he is working to “reset” the business during the 2015 financial year.
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