Australian winemaker TWE to buy Diageo's wine business

Australian winemaker TWE to buy Diageo's wine business

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One of the world's biggest publicly-listed winemakers, Australia's Treasury Wine Estates (TWE), has agreed to buy the majority of Diageo's wine businesses for
$552m (£361m).
The sale includes Diageo's UK-based Percy Fox businesses and its US-based Chateau and Estate Wines.
Melbourne-based TWE is famous for Penfolds, and its brands also include Rosemount Estate and Wolf Blass.
The deal will also see TWE take over $48m in vineyard leases.
Diageo - which owns Johnnie Walker, Smirnoff vodka and Guinness among other brands - owns vineyards in Napa Valley, California, and the popular lower-end commercial UK wine brand Blossom Hill, which is included in the deal.
The company is selling the wine brands as part of a shake up of its business. Last week, Diageo announced it was selling stakes in two beer brewers to Heineken for $780.5m.
Diageo chief executive Ivan Menezes said: "Wine is no longer core to Diageo and this sale gives us greater focus. With the completion of this transaction Diageo will have released £1bn from the sale of non-core assets since the start of the financial year."
TWE plans to pay for the purchase in part by issuing new shares.
Sydney-listed shares in the Australian wine firm were halted from trading ahead of the announcement. The company said the trading halt would be lifted on Monday 19 October.

Transformation

Penfolds
TWE plans to pay for the purchase in part by issuing new shares. Sydney-listed shares in the firm were halted from trading ahead of the announcement, with trading set to resume on Monday 19 October.
TWE has been through a difficult period in recent times. In August last year, it posted its first annual loss due to slower sales in China and oversupply in the USMARKET.
The following month, the firm's shares fell some 13% after it rejected two separate multi-billion dollar takeover offers.
wines
However, this year the wine company posted an annual net profit of $77.6m Australian dollars ($56m; £36.6m), noting strong growth in China, among other areas.
On Wednesday, TWE said the Diageo deal was "financially and strategically compelling" for its stakeholders and announced an improved financial outlook.
"This acquisition will transform our US business into a larger player of scale in the... high-growth US market," said chief executive Michael Clarke.
"The additional supply (of wine) will be a game-changer for our US brands, providing us with an immediate opportunity to step-change our growth in the US, Canada, Asia and Latin America," he added.
TWE started trading on the Australian Securities Exchange (ASX) in 2011.

CULLED FROM BBC

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