Analysts See A Significant U.S. Deal Ahead For TreasuryApril 11, 2018
Analysts continue to raise expectations that Treasury Wine Estates (TWE) will soon make a sizeable acquisition in the U.S. According to the Australian Financial Review, Macquarie analysts see TWE acquiring “a medium-sized winemaking and marketing company in the U.S.,” and named Vintage Wine Estates and Ste. Michelle Wine Estates as potential targets.
Macquarie envisions a potential $3 billion purchase of Washington-based Ste. Michelle, which reported a 6.4% net revenue decline to $698 million for the year ended December 31. Shipments fell 8.6% to around 8.5 million cases, with parent company Altria citing negative impact from “competitive activity, continued trade inventory reductions, and slower premium wine category growth.”
According to Impact Databank, Ste. Michelle’s 14 Hands and Columbia Crest brands both declined last year after posting double-digit growth in 2016. Last spring, rumors swirled that Constellation might also be interested in Ste. Michelle, with Washington wines rising in the marketplace. At that point, analysts suggested Altria could eventually sell Ste. Michelle at a price estimated to fall between $3-$4 billion.
Vintage Wine Estates has volume of around 1.8 million cases and has been on an acquisition run of its own lately, acquiring the Layer Cake, Cherry Pie, and If You See Kay brands from One True Vine for an undisclosed amount late last year (Deutsch Family Wine & Spirits is now handling Layer Cake’s sales and marketing nationally). Earlier last year, Vintage added Oregon’s Firesteed brand and, in January, it purchased Washington’s Tamarack Cellars. As it continues to build its portfolio, it’s unclear if Vintage would entertain acquisition offers.
TWE’s Americas unit posted a 10% decline in net revenue to A$504 million ($407m) for the six months through December, mainly driven by its exit from the commercial end of the business. But TWE’s luxury and masstige ($10-$20) segments saw combined depletions growth of 13% for the period, and earnings were up 13% to A$100 million ($81m). CEO Michael Clarke has been clear that the group is keen to further premiumize the portfolio, with acquisitions being part of the mix. Now, analysts and investors see TWE as primed to make a significant move.—Daniel MarstellerSubscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning.