Overflowing Treasury on verge of acquisition

Morgan Stanley says Treasury Wine Estates has entered the ‘start of a golden period’. Picture: Liam Kidston.

Australia’s Treasury Wine Estates is believed to be running the ruler over its next US acquisition, which could be announced as early as next month.

The company, which began as the old Southcorp business and is headlined by the lucrative Penfolds and Wolf Blass labels, has surprised analysts with its strong performance over the past year.

Its Chinese business has taken off, which Morgan Stanley recently called the “start of a golden period”, as mainland consumers look to foreign wine brands to show off their wealth.

But it’s believed that Treasury is sharpening its focus on the US which is becoming a major part of its global portfolio.

Up to 50 fund managers will descend on Treasury’s Napa Valley headquarters on March 9 and 10 for a two-day confab and strategy briefing run by chief executive Michael Clarke, who last year netted himself a $6 million pay cheque.

Some of the local fund managers believe the company must have a major announcement in mind to invite so many of them to enjoy a California spring.

Treasury would not comment directly on the likelihood of a purchase being revealed next month but many in the market believe the timing makes sense.

The winemaker will announce its results on February 14 where analysts have predicted that earnings per share growth could be as high as 20 per cent. At the same time, there is speculation Treasury could carry out a capital raising to fund the potential acquisition with enough time before the announcement in early March.

The stock has been a standout performer on the market, with its shares rallying from a low of $9.16 in August to yesterday’s closing price of to $11.48.

Bankers are trying to guess the likely takeover target and one name doing the rounds is Ste Michelle Wine Estates, a Washington-state based winery which marks its 50th anniversary this year.

Treasury’s business in the US has been growing, led by the Beringer, Beaulieu and Sterling wine brands.

Its last results presentation shows that the US business now makes up nearly 44 per cent of the company’s total sales revenue, while its EBIT contribution is 36 per cent.

Meanwhile, the future of Accolades Wines remains up in the air with a trade sale or float still under consideration.

CHAMP, the private equity seller, appointed Citi and Morgan Stanley as the main advisers on the belief that UBS and Macquarie would be snowed under with their solid pipeline of deals.