Accolade switches from Australian Vintage to Pernod Ricard bid

Australian Vintage is now trying to raise between $10m and $50m in equity as it negotiates with its lenders.

Accolade Wines is believed to be progressing with talks on a deal to buy Pernod Ricard Australia as some in the market see a break-up of Australian Vintage as a possibility.

As Australian Vintage confirmed on Monday that talks for a backdoor listing by Accolade Wines had collapsed, sources said Accolade Wines’ negotiations with Pernod Ricard were moving closer to a merger transaction.

Five years ago, Pernod Ricard’s local business – which includes Australia’s Jacob’s Creek and New Zealand’s Brandacott Estate – was thought to be worth at least $700m, or 13 times its earnings.

But that was in a more buoyant market when soaring inflation in shipping and bottling costs, labour shortages and oversupply were not weighing so much on the industry.

Australian Vintage is now trying to raise between $10m and $50m in equity as it negotiates with its lenders.

But some say that attracting investors to put money into the commercial wine business could be a challenging assignment and that perhaps small asset sales of its business is the next step.

Australian Vintage is suspended from trade for two weeks as it also negotiates with its lenders. It has made efforts to sell assets before.

Australia’s largest member-owned wine grape co-operative last week voted down a new agreement with Accolade Wines, and the current contract on foot makes it hard for the company to make money.

Meanwhile, Australian Vintage’s future is hanging in the balance as Accolade Wines itself has been at the mercy of its lenders in the past year.

The business has been owned by The Carlyle Group, but is now owned by a Bain Capital-led lending syndicate that recapitalised the business.

It’s been a tough couple of years for large private equity funds with their investments they paid up for using large amounts of debt, particularly in the consumer and healthcare sectors.

Kohlberg Kravis Roberts lost the country’s largest cancer care provider, Genesis Care, in a Chapter 11 Bankruptcy restructure.

Carlyle lost control of Accolade Wines to Bain Capital, and now Brookfield is playing hard ball with lenders of its private hospital operator, Healthscope, which is under financial pressure.

The move to separate out Healthscope’s best two hospital assets – Gold Coast Private and Sydney’s Norwest Private – into a new structure has raised eyes among lenders.

It is seen as a particularly aggressive move and one that could set a precedent on future deals to come if successful.

Now the focus has swung back to KKR as S&P revised the outlook of its Australian accounting software business, MYOB, to negative B-minus, which is effectively junk bond status.

It has loans worth $1bn and a $43.5m revolving credit facility with debt maturing in 2026.

The business has had a challenging time competing with industry rival Xero.

All of the businesses were bought in an environment of cheap debt, and that’s since changed, so there’s likely to be further fallout in the elevated interest rate environment with portfolio investments by big buyout firms in the months ahead.