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Treasury Spurns $2.9B Takeover Bid By Private Equity KKR

May 20, 2014

Treasury Wine Estates (TWE) has rejected a A$3.05 billion ($2.9 billion) takeover offer from private equity firm KKR & Co., but says it will continue to engage with interested suitors.

After Treasury today disclosed the bid, which was offered in mid-April, its shares rose 18% to A$4.80 ($4.44), just above KKR’s offer.

“Since the proposal was received on 16 April, TWE has held preliminary and confidential discussions with KKR,” Treasury’s statement read. In a conference call today, Treasury CEO Michael Clarke said the dialogue would probably have continued if word of it hadn’t been leaked by KKR.

In recent weeks, Treasury has fended off rumors that its U.S. business, valued around A$800 million ($741m), is in play, asserting that it remains a key part of its turnaround strategy. Among its Australian brands, Penfolds alone is valued at A$3 billion ($2.78b) or above, according to Merrill Lynch analyst David Errington.

After its profits were halved in its last full fiscal year (through last June), Treasury continued to face tough conditions in the six months through December, with global volume slipping 7.5% to 15.3 million cases and net sales declining 0.6% to A$811.9 million ($731m).

In a separate statement today, Treasury outlined a plan to cut costs by A$35 million ($32m) and put the savings toward an effort to boost consumer marketing by 50% in its next fiscal year.

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