The world’s biggest listed winemaker is at the centre of a bidding war as a second private equity suitor has approached the firm.
Treasury Wines, which owns around 80 brands including Penfolds, Wolf Blass and Lindemans, has received a $3.1bn (£1.9bn) bid from TPG Capital Management – the same amount offered by rival bidders KKR and Rhone in a joint bid earlier this month.
Both bidders have been given access to the Australian winemaker’s books to start due diligence, although some shareholders seem to think a third, increased bid could be on the cards, as shares closed at A$5.33 – 2.5 per cent above the A$5.20 offer.
KKR had made an initial approach to Treasury in April with a A$4.70 a share offer, but this was swiftly rejected by the board.
Despite struggling in the past year, chief executive Michael Clarke, who joined in March, previously said plans were afoot to turn around the firm’s fortunes without it being sold off.
However, yesterday the company said: “The board of TWE has concluded it is in the interests of its shareholders to engage further with this private equity investor.”
TPG has owned Treasury before, having sold it to Fosters in 2000. The brewer then spun it out in 2011 after a A$1bn write-down following a glut of Australian grapes and weak sales in the US.
Since then Treasury has continued to struggle, especially in the US due to a strong Australian dollar and premium wine not in such high demand compared with Asia.
It also faced problems in China as the government there pushed an austerity drive to cut back on extravagant gifts between businessmen and politicians. However, bosses have said an increase in Japan could help offset the falls in China.
Last year Treasury had to write down A$160m, due in part to unsold stock, as bosses had to pour away six million bottles of out-of-date wine in the US, while this year management have revealed a write-down of A$260m after overpaying for assets.
It has since led to a major overhaul, with the chief executive, chief finance officer and heads of its Asian and Australian businesses being shown the door.
New boss Mr Clarke has instigated a new business model that will see 175 job cuts. He is no stranger to turnarounds, having spent 18 months at the Mr Kipling to Bisto owner, Premier Foods, before unexpectedly quitting to look for a bigger job.
Private equity group KKR is particularly keen to snap up the business, due to the A$6bn new Asia-Pacific fund it set up last year, while TPG is hoping for a successful deal as it continues to recover from bets that failed during the 2008 financial crisis.