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Treasury Wine Estates turns down private equity bids

Published:  29 September, 2014

Treasury Wine Estates has rejected two offers from private equity bidders in favour of continuing as a standalone company.

Treasury Wine Estates has rejected two offers from private equity bidders in favour of continuing as a standalone company.

The wine firm's shareholders said they believed the $5.20 per share offer undervalued the company.

Treasury has now terminated due diligence - it had opened its books to joint bidders Kohlberg Kravis Roberts & Co and Rhône Capital as well as another unnamed party, thought to be TPG Capital.

The bids, amounting to AU$3.4 billion, were received on August 4 and 11 respectively, although no formal offers were made.

The board and management team has since consulted with shareholders who hold approximately 50% of shares, in order to get feedback on the offers. They said the offers were not enough.Rather shareholders felt Treasury would deliver its already stated objectives over time. These include:

  • Increasing and accelerating consumer marketing investment
  • Changing flagship brand Penfolds release dates
  • Slashing overheads
  • Treasury Wine Estates's new chief executive joins from British firm Premier Foods, and has experience across Kraft Foods and Coca-Cola.

  • Making supply chain savings by separating the commercial from the luxury and mid-tier portfolios in Australia
  • Enhancing consumer, retailer and distributor relationships and building its priority brands

A statement from Treasury read: "Throughout the due diligence process the private equity bidders indicated support for management's strategic plans and roadmap. They also did not identify any major concerns with the business. However, it is now apparent to the company that the bidders are not able to support a transaction on terms and at a price acceptable to the board."

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."

However analysts were not necessarily convinced."You've effectively gone through two previous management teams that have said the right things and haven't delivered... it's hard to see what's going to change that," said Morningstar analyst Daniel Mueller.

The firm said its year-to-date performance is tracking ahead of its plan, although did not divulge any firther details. 

The company's end of year results, released in August, showed a  loss of AUD$100 million for 2014, down by 33% for the year to June 30, 2014. At the time chief executive Michael Clarke said the firm had suffered a "number of operational and trading headwinds".