TWE’s $100m cash boost in TWG US deal
Treasury Wine Estates expects an additional $100m cash boost as part of a new licensing deal with US giant, The Wine Group.
Treasury Wine Estates has signed a licensing agreement with the world’s second largest producer, the Wine Group, for key commercial tier brands from its US portfolio.
The long-term licensing agreement, effective March 9, will see The Wine Group source and sell the Beringer Main & Vine, Beringer Founders’ Estate, Coastal Estates and Meridian brands in the Americas.
The Wine Group will acquire existing inventories associated with these brands on a progressive drawdown basis and will assume responsibility for related future bulk wine supply contracts.
Treasury Wine Estates, which has seen its share price spike nearly 10 per cent to $11.10 so far this week due to investor anticipation around its deals, clarified that the Beringer brand will be licenced to The Wine Group for use on Main & Vine and Founders’ Estate ranges only.
“All other Beringer branded products will remain with TWE,” it told investors on Wednesday
“Beringer remains a core brand within the TWE portfolio and there is no intention for TWE to dispose of the Beringer brand as part of this or any future transactions.”
In the six-month period to December 31, these brands contributed 2.3m cases of volume, $92m of net sales revenue (NSR) and $13.5m of gross profit.
The deal will generate cash proceeds of approximately $100m.
“We are delighted to be entering into this long-term transaction with The Wine Group, which will be of mutual long-term benefit to our respective organisations,” TWE’s chief executive Tim Ford said.
“For TWE, this transaction is a significant milestone towards our plans to deliver the future state premium US wine business and we can now focus solely on continuing the growth of our premium brand portfolio to drive future performance in the Americas.”
The group said it expects to generate one-off net cash inflow of at least $300m as part of the Americas plans.
Earlier this week, British Press reported French drinks giant Pernod Ricard – owner of Chivas Regal and Absolut Vodka – could be mulling a £5bn ($9bn) takeover for the Australian winemaker, which also owns the South Australian-born Penfolds and Wolf Blass brands.
Treasury Wine, valued at $8bn, is scrambling to fill the earnings hole created by the imposition of crushing 200 per cent-plus tariffs on wine exports to China.
As revealed last month, Mr Ford is also leading a three-way structural split of the wine company, after shelving earlier plans to spin off and demerge luxury brand Penfolds.
From July, the new structure will have its luxury brand Penfolds, a premium-to-commercial division called Treasury Premium Brands and a third division called Treasury Americas.
The Wine Group’s chief executive Cate Hardy said the acquisition of the brands further positions it as a global leader in wine.
“Adding these brands complements TWG’s leadership in the value segment along side our growing portfolio of premium wines, introducing more consumers to our high quality wines at every price point.”
Treasury Wine’s half-year profit to the end of December was down 42.8 per cent to $120.9m while revenue slipped by 8.2 per cent to $1.4bn.
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