Treasury Wines spurns suitors

 
AUSTRALIA'S largest winemaker, Treasury Wine Estates, has rejected takeover proposals from two global private equity firms, prompting a sharp fall in the company's share price.
TREASURY, which owns Penfolds, Wolf Blass and a host of other prominent labels, had been in talks with Kohlberg Kravis Roberts and a rival suitor, believed to be TPG.
The two firms each proposed paying $5.20 a share, valuing Treasury at almost $3.4 billion. But after talking with its major shareholders about the proposals while the two suitors appraised Treasury's business, the winemaker decided to knock them back. Most of Treasury's major shareholders believed the proposed offers were simply too low. Treasury chief executive Michael Clarke said that after two months of talks with the suitors, it became apparent that they were unable to address potential regulatory concerns in the US or finalise an acceptable financing structure. Mr Clarke said he did not think that either of the suitors would return with fresh proposals. "I think it's over is my point of view," he said on Monday. Investors were disappointed and pushed down Treasury's shares by 55.5 cents, or 11.3 per cent, to $4.365 by 1456 AEST. However, they recovered somewhat to close 42 cents, or 8.54 per cent, lower at $4.50. IG market strategist Evan Lucas said Treasury's share price received a boost when the takeover proposals emerged earlier this year, but was now under pressure given the door had been closed to the private equity firms. "I think you're probably going to see further downside for the interim," Mr Lucas said. Mr Clarke said Treasury could deliver better value for shareholders through its turnaround strategy, which includes moves to cut costs, bolster its luxury and prestige brands, and better manage the cheaper commercial brands. Mr Clarke said both private equity firms had fully endorsed Treasury's strategy and plans. Furthermore, Treasury's performance in the first three months of the 2015 financial year was on plan or ahead of plan in terms of volume, revenue, profit growth and underlying earnings. The improved performance was across all four of the company's operational regions. Mr Clarke said Treasury Wine had tremendous growth opportunities in North America, and alliances could help the group in Asia and Europe. Treasury's share price has fallen 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 $101 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 old and excess wine.