This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Treasury Wine Fizzes After KKR Bid

NEW YORK (The Deal) -- Australia's largest wine maker Treasury Wine Estates Ltd. has rejected a A$3.05 billion ($2.83 billion) bid from Kohlberg Kravis Roberts & Co., claiming the offer of A$4.70 per share undervalues its operations.

KKR made the non-binding offer on April 16, prompting confidential talks that ended without an agreement, Treasury Wine on Tuesday, May 20.

"The proposal does not reflect the fundamental value of the company and it is therefore not in the best interests of shareholders," Treasury said. "The board...does not intend to take any further action in relation to the proposal."

KKR's April 16 bid came a week after the Melbourne-based wine maker's new CEO Michael Clarke told analysts "everything is on the table" as he conducted a strategic review aimed at turning around the underperforming business.

That review had been expected to result in an effort to sell Treasury Wine's packaging assets and its underperforming U.S. operations, which last year cost the company A$160 million in writedowns as falling demand left it having to crush thousands of low-cost bottles of wine. Clarke has promised to trim A$35 million of expenses by the end of 2015, but has admitted that the process will likely result in further writedowns.

Treasury produces wine under 51 different brands, ranging from Australia's most sought-after red, Penfolds Grange, to U.S. mass market bottles such as Sledgehammer. The company posted Ebit of A$45.8 million for the six months to Feb. 20, down 39% over the same period a year earlier, on sales of A$812 million, down 0.6%.

Treasury could be worth significantly more than its current market capitalization if it were broken up, according to analysts. Its Penfolds brand wines might be worth more than A$3 billion on a stand alone basis, while its U.S. assets could fetch more than A$800 million, Bank Of America Merrill Lynch's David Errington noted in February.

KKR confirmed its offer for Treasury, noting in a statement to the Australian Stock Exchange that the bid valued the target at a 27% premium to its April 15 closing price, and a 29% premium to the "median broker consensus target...of A$3.64 per share."

The New York-based buyout shop said that its target turned down a request to access Treasury's books. The Australian target said that it revealed the offer after KKR approached "one or more" of its shareholders, meaning that the bid could no longer be considered confidential.

Treasury Wine's shares closed Tuesday at A$4.80, up A$0.73, or almost 18% on their Monday close, as investors bet that KKR, or a rival, would return with an improved offer.

"We believe it most likely that KKR will further sweeten their bid in coming weeks, albeit not materially higher," Macquarie Securities (Australia) Ltd. analysts Craig Collie and Ben Tedder noted on Tuesday.

Treasury, which is the world's No.2 vintner behind Constellation Brands Inc., was spun out of Australian brewer Foster's Group Ltd. in 2011, in a move that was widely predicted to put both companies in play. Fosters was duly snapped up by SABMiller plc after agreeing to a A$12.3 billion takeover in 2011, while Treasury has limped on, buffeted by occasional rumors of a potential bid. Treasury has this year twice issued statements denying that it has received bids for its U.S. operations from Pernod Ricard SA, of France, and Constellation Brands, of Victor, N.Y.

Treasury's closing price of A$3.69 per share prior to the bid was just 7% higher than its A$3.45 closing price on the day after it was spun out of Foster's in May 2011. The shares traded as high as A$6.43 in May last year.

Treasury is taking financial advice from Goldman Sachs Group Inc. KKR tapped Nomura Holdings Inc.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AAPL $124.24 0.70%
FB $83.01 0.11%
GOOG $555.17 -0.65%
TSLA $190.41 -2.00%
YHOO $44.47 0.61%


DOW 17,678.23 -40.31 -0.23%
S&P 500 2,056.15 -4.90 -0.24%
NASDAQ 4,863.3620 -13.1570 -0.27%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs