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Treasury Share Price In Roller Coaster Ride As Takeover Rumors Drive The Market

July 6, 2011

Shares of Treasury Wine Estates closed at A$3.50 ($3.74) Wednesday on the Australian Securities Exchange in Sydney, down 2.51% as the share price continued to tumble following Tuesday’s denial by China-based Bright Food Group that it was planning a bid for the company. Treasury’s share price had surged by more than 10% on Monday, peaking at A$3.72 ($3.97) following reports of a Bright Food bid.

Bright Food has said it may consider acquiring wine assets in Australia, France, Chile and/or the United States in the future, so a subsequent bid for Treasury isn’t entirely out of the question. It’s also likely that any prospective bidder would prefer to wait out the market to see where Treasury’s share price heads in the near term. In addition, a newly released Credit Suisse analyst report said a strong Australian dollar is putting pressure on Treasury’s valuations and may force the company to write down the book value of its assets by as much as A$585 million ($624m)—equal to A$1 ($1.06) a share. The book value of Treasury under the Foster’s umbrella last year was A$3 billion ($3.2b). Any asset write-down would almost certainly reduce the price of a future takeover bid.

Meanwhile, SABMiller’s bid of A$4.90 ($5.23) a share for Foster’s remains stalled. Foster’s has rejected the roughly $10 billion total offer, and SABMiller hasn’t presented a counter-proposal. Most observers think SABMiller will wait to see whether Foster’s share price declines, particularly if no rival bidders emerge.

 

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