Treasury Wine placement shortfall a sign of the market

Sub underwriters on the Treasury Wine Estates equity raising deal have been left with 16 million shares.

Treasury Wine Estates’ lagging share price shows further evidence that investors are losing patience with expensive mergers and acquisition deals in the current market.

And it’s to blame for why investors did not snap up shares in the retail shortfall bookbuild on Tuesday.

Sub underwriters on the Treasury Wine Estates equity raising deal have been left with 16 million shares that did not sell at the floor price of $10.80 each – more than the price that the stock closed at on Tuesday of $10.41.

On Wednesday, the shares closed at $10.62.

Sources say that the share price in Treasury Wine Estates traded lower because investors were unimpressed with its $US900m purchase of luxury US wine business DAOU.

Investor sources say that concern centres on Treasury Wine paying too much for the business and scepticism about the growth projections of the wine company.

It’s a theme playing out through the broader market where the rising cost of debt and volatile market conditions is making investors more choosy about what transactions they are prepared to back.

Another example of pushback against expensive mergers and acquisitions was the attempted purchase of Greencross for almost $4bn by EBOS that called off the deal this month after efforts to raise $2bn from equity investors were said to have become too challenging.

Treasury Wine Estates launched a fully underwritten 1 for 9.45 pro rata accelerated renounceable entitlement offer announced on Tuesday, October 31 to secure about $825m at $10.80 per share to pay for DAOU.

It also secured $157m through a placement at $11.97 per share.

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

Treasury also sourced $490m of debt to fund the acquisition.

Working on the raise has been investment banks UBS and Macquarie Capital.