Last month TWE, the Australian wine company whose brands include Penfolds and Wolf Blass, received two takeover approaches. One came from KKR and Rhone Capital, and another from an unnamed global private equity firm (reported to be TPG Capital Management).
Both ‘unsolicited, indicative, non-binding and conditional proposals’ offered $5.20 AUD ($4.53 USD) cash per share, putting the value of TWE at $3.38bn AUD ($2.95bn USD).
Today TWE announced it has ceased all discussions, saying the bidders were not able to support a transaction on terms and at a price acceptable to its board.
TWE ‘undervalued’
In an Australian Stock Exchange (ASX) announcement, the company said, “The company made clear in communications to the market at the time [of the proposals] that there was no certainty a formal offer would eventuate, but that it was in the best interests of shareholders to engage with the bidders.
"On that basis, each was given an opportunity to conduct non-exclusive due diligence.”
Over the past month the board and management have been in discussions with shareholders (who together held around half of the company’s shares).
“These discussions provided a forum for these shareholders to express a view on the proposals, with clear feedback from almost every one of these shareholders indicating that they believed a price of $5.20 per share undervalued the company,” TWE continued.
“Throughout the due diligence process the private equity bidders indicated support for management’s strategic plans and roadmap. They also did not identify any major concerns with the business.
“However, it is now apparent to the company that the bidders are not able to support a transaction on terms and at a price acceptable to the board. Accordingly all discussions have now ceased.”
Shares fall
Shares in TWE have plunged by more than 14% in response to the news, according to The Australian newspaper.
Treasury Wine Estates’ brands include Beringer Vineyards, Lindeman’s, Penfolds, Rosemount Estate and Wolf Blass.
The company reported its full year 2014 results in August, with net profit down 20.4% to AUD $112.8m ($98.4 USD), while nine-liter case sales fell 6.4% to 30m; net sales rose 1% to AUD $1.7bn ($1.5 USD).
But a post-tax write down of AUD $280.6m (reflecting a July 2013 decision to destroy old and outdated US stock that also led to a shareholder-led class action) meant the firm lost AUD $100.9m.