Treasury Wine Estates rejects an offer of buying of $3 billion

The Australian group believes the takeover offer under its “fundamental value“

Treasury Wine Estates, one of the world’s largest wine players with 54 wineries worldwide just refused an offer of 2.07 billion euros. The offer of U.S. Private-Equity Firm Kohlberg Kravis Roberts (KKR) was considered below the actual value of the group. Indeed, in its press release the group writes “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 shareholders.”

Over the last few months Treasury Wine Estates seems to be a conveted prey. Indeed few rumors have circulated about the redemption of this giant wine company by largest groups such as Pernod Ricard or Constellation Brands.

Note that the KKR purchase bid values Treasury Wine Estates  at 3.05 billion dollars (2.07 billion euros), representing 3.19€  ($ 4.70 AUD) per share representing 15 % more than the market value at May 19.

Treasury group is the owner of different kind of wineries such as Beringer (Napa Valley), Chateau St Jean (Sonoma), Penfolds (Australia), Tierra Secreta (Argentina) or Castello di Gabbiano (Italy) … A very diverse portfolio comprising various styles of wines from four continents and each with a price positioning quite different. The company has 11,000 hectares of vineyards and sells each year 32 million cases of wine.

In the past few months Treasury Wine Estates had destroy 6 million bottles (representing $35 billion) of low-end wine poured down drain. This extreme solution was justified by a storage time too long that had impacted the wine. Shortly after the group said its willingness to focus on the high-end, a range of wine easier to sell for this group.

Finaly, in coming months we will know if Treasury Wine Estates chose to spin off its low-end brands or if the group prefers to be bought by a largest wine group…

Jonathan Choukroun Chicheportiche