Taking a page out of Snapchat's book, Treasury Wine Estates, the world's second-largest wine company and makers of Penfolds Grange, spurned an offer for what would have made a tremendous takeover, the value of which has our heads spinning. Similar to the photo- and video-sharing social app's thanks-but-no-thanks response to Facebook, Treasury denied a $2.9 billion offer from KKR & Co. Not so similar? Unlike Snapchat's upward momentum, Treasury's recent stumbles (including poor U.S. sales) are the reason private equity firms saw the Australian winemaker as opportune for a takeover.
The bid was made over a month ago April 16. KKR had requested that the bid was kept confidential, but unable to gain ground with Treasury's board, they began reaching out to influential shareholders. In the eyes of the winemakers, this voided the confidentiality agreement and they, in turn, released the information surrounding the bid, including from whom the bid was coming. Now, there is the potential of a hostile takeover if the private equity firm decides to forgo formalities and introduce their bid directly to the shareholders.
Treasury is working overtime to meet its earnings forecast, but given the current trading conditions in Australia, it has proven to be difficult. The Aussie dollar's relative strength has made their products less competitive. In fact, this is the third time a takeover has been speculated, though it is the first time there was an official bid to report. And the country is in stranger to takeover bids, the past decade has seen many in the way of food, drink, and agricultural businesses, especially with increased interest from up-and-coming major market influencers such as China. Treasury was formerly associated with Foster's Group Ltd., before breaking off in May 2011. The brewer would be acquired for A$10.5 billion by SABMiller Plc later that year.
According to Australian media outlets, David Errington, an analyst at Merrill Lynch, wrote in a February note to clients that Penfolds was worth around A$3 billion, and that U.S. assets could fetch upwards of A$800 million. Many of these aforementioned assets are currently underused, and analysts and investors alike have encouraged Treasury to sell. But that number is in flux. Despite the denial of the bid, shares for the Australian winemaker are poised for a record gain in an anticipation of a change of gaurd, $0.16 (in Aussie dollars) higher than what KKR valued them at. Before yesterday's upswing, Treasury's shares had fallen around 37% over the past 12 months.
However, in a separate statement, CEO Michael Clarke stated that the company plans to save around A$35 million of during the course of the next year by cutting jobs and costs. The savings will then be used to increase its consumer marketing spend by 50%.
Neither Treasury nor KKR has responded to request for comments.
