Treasury Wine will spend as much as $1bn buying Californian winemaker DAOU Vineyards

Treasury Wine will ramp up its exposure to the US and the largest winemarket in the world after agreeing to spend as much as $US1bn for a Californian winemaker.

Treasury Wine Estates chief executive Tim Ford. Picture: Aaron Francis

Treasury Wine Estates, makers of iconic wines Penfolds and Wolf Blass, will significantly ramp up its portfolio of US wines and exposure to the largest wine market in the world after agreeing to buy California’s DAOU Vineyards for as much as $US1bn ($A1.57bn).

Marking its largest acquisition since Treasury Wine demerged from beer giant Foster’s in 2011 and cementing its place as a major wine producer in California, the winemaker will partly fund the deal through a $825m equity raising by way of a fully underwritten renounceable entitlement offer to shareholders.

The deal follows its purchase of Napa Valley’s Frank Family Vineyards for $US315m in late 2021 - that gave it a major foothold in the US drinks market - and before that purchase of British drinks giant Diageo’s wine assets in 2015 for $754m.

Now under chief executive Tim Ford the company is tightening its focus on the US market with its second major wine acquisition in California and with a particular gaze on the more premium to luxury of the wine market for wines that sell between $US20 and $US100 per bottle.

Unveiling the deal before the stock market opened on Tuesday, Treasury Wine said DAOU is a highly acclaimed luxury wine brand based in Paso Robles, California, and the fastest growing luxury wine brand in US trade over the past year.

It said the acquisition accelerates Treasury Wine’s focus on luxury-led portfolio premiumisation to approximately 50 per cent of global group net sales revenue with immediate accretion to key operating metrics, and creates a leading and iconic US luxury wine business through the combination of Treasury Americas and DAOU.

It’s the second Californian investment for Treasury Wines.

The acquisition is expected to be earnings per share (EPS) accretive (pre-synergies) and mid to high single digit EPS accretive (pro forma for cost synergies of US$20m+) in fiscal 2025, the first full year of ownership.

Treasury Wine has entered into arrangements to acquire 100 per cent of DAOU for upfront consideration of $US900m, plus an additional earn-out of up $US100m payable in the event that certain sales revenue targets deliver growth in excess of pre-agreed thresholds from 2025 to 2028.

Treasury Wine boss Mr Ford said he was delighted to welcome the DAOU brand to the company, including its award-winning portfolio, experienced leadership team and aligned culture.

“The acquisition reflects the continuation and acceleration of our luxury-led portfolio premiumisation strategy with the luxury portfolio now contributing 50 per cent of group net sales revenue and the quality of Treasury Wine’s and Treasury Americas operating metrics improving immediately and in the future.

“The combination of Treasury Americas and DAOU creates a leading luxury wine business in the United States, the world’s largest luxury wine market which is growing strongly, with an unparalleled portfolio of highly acclaimed and admired Luxury brands. We continue to see strong long-term growth trends for luxury wine in Treasury Wine’s key global markets, with a significant value creation opportunity.”

Funding for the deal will include an $825m equity raising by way of a fully underwritten pro-rata accelerated renounceable entitlement offer with retail entitlements trading, a $157m placement of new Treasury Wine shares to the existing owners of DAOU at an issue price of $11.97 per share.

The entitlement offer to Treasury Wine shareholders is at an offer price of $10.80 per new share.