TPG Said to Offer $3.2 Billion for Treasury Wine, Matching KKR

Aug 10, 2014 8:37 pm ET

Aug. 11 (Bloomberg) -- U.S. buyout firm TPG Capital offered A$3.4 billion ($3.2 billion) for Treasury Wine Estates Ltd., according to a person familiar with the matter, matching a takeover bid by KKR & Co. and Rhone Capital LLC.

A global private equity firm bid A$5.20 cash per share in a non-binding offer for the maker of Penfolds Grange and asked that its identity remain confidential, Treasury Wine said in a regulatory filing today. The unidentified bidder is TPG, according to the person, who asked not to be identified because the details are private.

“With two bids at the same price, private equity believes A$5.20 a share is fair value,” Evan Lucas, a market strategist at Melbourne-based IG Ltd., said by telephone. “The management and board wouldn’t let go without a considerable premium to fair value. There are now two competing bids and Treasury Wine shareholders can get a little excited and hope for a bidding war to eventuate.”

KKR made an initial A$4.70 per share offer for the world’s second-largest listed winemaker in April and raised its bid on Aug. 4. Treasury Wine’s Chief Executive Officer Mike Clarke has promised to revitalize the company by spending more money on marketing and selling off winery and packaging plants, amid oversupply problems in the U.S. and a government austerity drive that’s curbing sales in China.

TPG’s indicative, conditional offer is 1.4 percent above Treasury Wine’s last closing price of A$5.13. The identity of the bidder was reported earlier today by the Australian Financial Review, citing unidentified people.

‘Reset Year’

The Melbourne-based company’s shares had lost 36 percent of their value over the 12 months before KKR’s initial approach was revealed May 20. Clarke, a former chief executive officer of Premier Foods Plc and executive of Mondelez International Inc. and Coca-Cola Co., described the coming 12 months as a “reset year” in a media call that day and said the company had more long-term value than was apparent from its current performance.

The Treasury Wine board “has concluded that it is in the interests of its shareholders to engage further with this private equity investor,” the company said in the statement today. The new bidder will be granted non-exclusive access to the company’s books, “subject to the negotiation of an appropriate confidentiality agreement.”

Treasury Wine took about A$160 million of writedowns during 2013 and lost four top managers, including its chief executive officer, chief financial officer, and the heads of its Asian and domestic businesses.

A crackdown on official gift-giving by China’s government had hit income in that market and meant that full-year earnings due Aug. 21 would be as much as 24 percent below a previous forecast, Treasury Wine said Jan. 30.

The company said June 25 it would also make an impairment of as much as A$260 million in the year ending June 30 as a result of overpayments for previous acquisitions, slowing sales of cheap wine, and writeoffs of brands and property. It will also spin off its Australian commercial wine business, which focuses on cheap bottles, into a unit separate to higher-priced brands.