McWilliam’s Wines back on the market after buyer’s funds dry up

As China slaps more tariffs on Aussie wine, white knight buyer dumps $46m takeover to save 141-year-old group.

The future of 141-year-old winemaker, McWilliam’s, has once again plunged into uncertainty after its prospective buyer failed to come up with the $46m needed to take over the group.

Global private equity and venture capital firm Prcstnt – pronounced “persistent” – twice asked for an extension to settle the deal following its initial November 27 deadline, shocking McWilliam’s administrators who said Prcstnt had provided “unequivocal evidence” that it had enough cash to close the deal.

Regardless, administrator Gayle Dickerson of KPMG granted the extensions - the second time on the condition it provide a non-refundable amount of $500,000.

The second deadline passed on Wednesday and with it no more cash. Now Ms Dickerson is dusting off the group - known for its $13 flagons of sherry and which collapsed in January - to find another buyer.

It comes on the same day that China’s Commerce Ministry imposed additional tariffs on Australia-imported wines, adding more levies after hefty anti-dumping duties applied two weeks ago.

“We regret to advise that the DOCA (Deed of Company Arrangement) has not been able to be completed as per the terms of the DOCA,” Ms Dickerson wrote in a letter to creditors and suppliers seen by The Australian.

“The deed administrators are currently assessing the options available including sale of the business while continuing to trade the business.”

Prcstnt, chaired by Melbourne businessman Charles Hunting, was planning to buy McWilliam’s using the investment vehicle MCW BidCo.

“MCW provided the deed administrators with unequivocal evidence in writing from its investors that funds were immediately available to make payment of the amounts payable by MCW to the deed administrators‘ account in accordance with the terms DOCA by close of business, Wednesday 9 December 2020,” Ms Dickerson wrote in her letter.

“(But) MCW failed to adhere to the conditions.”

Creditors overwhelmingly backed Prcstnt’s proposal, under which they would have receive 94c-100c in the dollar, in late July.

McWilliam’s On the Grapevine Rose

Prcstnt chair, Melbourne businessman Charles Hunting, said at the time McWilliam’s would become the firm’s “cornerstone investment”.

“While it is critical that McWilliam’s is moved out of administration and returned to profitability in the immediate term, over the medium to longer term we will look to inject further capital to scale the business in both domestic and international markets, while driving environmental outcomes in line with our philosophy,” Mr Hunting said ahead of the creditor vote.

McWilliam’s entered into voluntary administration in early January, after recording cumulative losses of close to $90m since financial year 2015. The net asset position of the group reduced from $57.4m on June 30, 2018, to $31.3m on December 31 last year.

McWilliam’s chief executive David Pitt, who was planning to stay on at the request of Prcstnt, said emerging from administration delivered the company certainty and allowed it continue its premium wine strategy, which it embarked upon about a year ago.

“Certainly there is a focus on continuing the premiumisation of the McWilliam’s brand, which we certainly have started and is certainly well underway,” Mr Pitt said after the creditor vote in July.

“One of the biggest challenges, which the new owner is very comfortable in assisting with, is capacity utilisation of our wine assets. We have significant wine capacity available, and certainly getting that capacity utilised is a big ticket to the game in terms of profitability.

“And there is the opportunity to look at our portfolio and bring in further brands through acquisition and distribution agreements.”

Ms Dickerson asked McWilliam’s suppliers to “please continue to provide any outstanding invoices payable by the deed administrators”.

“The deed administrators are currently determining the future of the DOCA and will be calling a meeting of creditors shortly.”