Banking appointments upset the pool on Treasury Wine deal

Treasury Wine Estates is buying US-based luxury wine business Daou for at least $US900m. Picture: istock

Treasury Wine Estates has made no secret of its plans to buy a US wine business operating in the luxury market, but perhaps the biggest upset of the transaction was the use of UBS and Macquarie Capital as advisers.

UBS counts Switzerland as its headquarters, while Macquarie Capital is Australia based, and one observation is that the use of the banks that aren’t a big force on Wall Street to embark on a US-based transaction is unusual.

However, it’s understood that the services of US-based boutique advisory firm PJT Partners were also called upon, while DAOU used Centreview Partners based out of the United States.

Over time, Treasury Wine Estates has counted New York-based Goldman Sachs as its adviser, but in recent years, other advisers have aided Treasury, with Macquarie assisting on its purchase of the Frank Family VIneyards in California during 2021.

Terms of the transaction were released to the market on Tuesday, where Treasury will pay at least $US900m for luxury wine brand DAOU, outlaying an extra $US100m if it achieves certain earnings targets between 2025 and 2027.

The deal values the business at 12.8 times earnings before interest, tax, depreciation and amortisation or 8.9 times adjusting for tax benefits and synergies.

Market experts believe that based on other sales of luxury wine businesses in Europe, the pricing appears to be reasonable, but others have vented frustration behind the scenes about the group getting bigger in luxury wine before tidying up its portfolio with the sale of its poor performing commercial brands.

In what has been one of the few large equity raisings this year in an otherwise quiet market, UBS and Macquarie will help Treasury raise $825m through an entitlement offer and $157m through a placement with DAOU at $11.97 per share.

The raise is a 10.7 per cent discount to the last traded price of $12.10 on October 30.

Treasury is also sourcing $490m of debt to fund the deal.

California-based DAOU, which sells wine between $US20 and $US40 a bottle, generated $US48m in annual EBITDA in 2022 and is expected to generate $US70m next year, with an annual growth rate of three times the US market.

For the nine months to September, UBS led the Refinitiv league table when it came to investment banking fees in Australia.