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After Higher Offer From KKR, Analysts Expect Bidding For Treasury To Heat Up

August 4, 2014

Following news out of Australia last night that private equities KKR and Rhône Capital have teamed to lodge a new bid for Treasury Wine Estates, analysts expect more interested suitors for the embattled winemaker to emerge.

KKR and Rhône have offered A$5.20 ($4.85) a share for Treasury. The new offer represents an increase of 11% over KKR’s April 16 bid of A$4.70 ($4.38)—which Treasury’s board rejected—and a premium of more than 40% above Treasury’s A$3.69 ($3.44) share price at the time of the original offer. The new price is around 14 times expected EBITDA for the current fiscal year, in line with major wine and spirits deals over the past decade, according to Bloomberg.

In light of the new offer, Treasury has now granted KKR and Rhône the opportunity to conduct non-exclusive due-diligence toward a potential acquisition, but cautioned that there’s no certainty a deal will come to fruition. Treasury’s board, which plans to evaluate the new proposal against its own turnaround plans—including increased marketing spend and an efficiency drive amongst other initiatives—would need to unanimously recommend the KKR/Rhône bid for it to move forward.

Analysts eyeing the possible tie-up see the new offer as the start to what could potentially become a crowded race to acquire Treasury. “Absolutely there are (rival bidders), they now have kind of set a starting point for the price,” Shannon Rivkin, director at Rivkin Securities, told Reuters, adding that it’s also possible KKR and Rhône could walk away from the deal pending their examination of Treasury’s books.

Treasury’s move to make the due-diligence process non-exclusive sends a signal that it may be expecting other bids. In addition to private equity groups, drinks industry players may also be sniffing around Treasury, with an eye toward a full or partial acquisition. Both Constellation Brands and Moët Hennessy have been floated as potential buyers weighing their options on Treasury, as has China’s Bright Foods, with Treasury’s upscale Penfolds brand of particular interest.

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