TPG Said to Match KKR’s $3.2 Billion Offer for Treasury Wine

Aug 11, 2014 4:09 am ET

(Updates with closing share price in sixth paragraph)

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 made a non-binding, A$5.20 cash per-share offer for the maker of Penfolds Grange and asked that its identity be kept confidential, Treasury Wine said in a filing today. The unidentified bidder is TPG, the person said, asking not to be named because the details are private.

By matching KKR’s offer, TPG can study the finances of the world’s second-largest listed winemaker in detail without committing to a purchase. Chief Executive Officer Mike Clarke has promised to revitalize Treasury Wine by spending more on marketing and selling off winery and packaging plants, amid oversupply problems in the U.S. and a government austerity drive that’s curbed sales in China.

“A deal will probably get done once you have this much interest in the business,” Craig Young, who helps manage about A$24 billion as a portfolio manager at Tyndall Investment Management Ltd. in Sydney, said by phone.

Extracting Value

The offer looks high and may be cut, as with the ongoing takeover of Australian baker Goodman Fielder Ltd., said Young, who doesn’t hold Treasury Wine shares. “You can offer anything to get your foot in the door but from our perspective it’s difficult to see how you could get that value out of it.”

Treasury Wine shares rose 3.9 percent to A$5.33 at the close in Sydney. That’s the highest level in more than a year, and above TPG’s indicative, conditional offer price. The identity of the bidder was reported earlier today by the Australian Financial Review, citing unidentified people.

KKR made an initial A$4.70 per share offer for the winemaker in April and raised its bid on Aug. 4.

TPG, the private equity firm run by David Bonderman, previously controlled Treasury Wine’s largest unit by sales, after buying it from Nestle SA in the 1990s.

Along with Napa-based wine investment firm Silverado Partners, it bought the Beringer business from the Swiss consumer goods company for $350 million in 1996. It was later listed before being sold to Foster’s Group Ltd. in 2000 for A$2.56 billion in debt and equity.

Fair Value

Foster’s spun out its wine assets in 2011 to form Treasury Wine before it was in turn taken over by SABMiller Plc.

“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. Treasury Wine shareholders can get a little excited and hope for a bidding war to eventuate.”

Low interest rates at a time of growing economic confidence have fueled a surge in acquisitions this year.

TPG has about $7.5 billion in announced, completed or proposed buyouts since January, making it the most acquisitive year since 2010 for the Fort Worth, Texas-based firm, according to data compiled by Bloomberg. KKR has $13.79 billion in deals in 2014 including its bid for Treasury Wine, the data show.

Melbourne-based Treasury’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.

China Gifts

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 over payments for previous acquisitions, slowing sales of cheap wine, and writeoffs of brands and property.

--With assistance from David Fickling in Sydney.