Australian company Treasury Wine Estates is considering a revised takeover bid from a US private equity firm KKR – three months after turning down its original offer.
New York-based global investment firm Kohlberg Kravis Roberts & Co (KKR) has partnered with Rhône Capital to increase its bid for the beleaguered wine company to US$3.2bn.
In April, Treasury (TWE) rejected a US$2.85bn bid from KKR saying the proposal did “not reflect the fundamental value of the company and it was therefore not in the best interests of shareholders”.
The announcement was not made public until 20 May and it vowed to continue the strategy implemented by new MD and CEO Michael Clarke to turn around the business, focusing on reducing overhead costs, addressing structural challenges and improving brand prioritisation and investment.
The private equity firms have now raised the proposed offer by $0.50 cash per share to $5.20 cash per share. Treasury issued a statement saying it was “in the interests of the shareholders to engage further with KKR and Rhône”. The two firms would be “granted the opportunity to conduct non-exclusive due diligence”, subject to conditions which included unanimous recommendation by the Board of TWE for the transaction and final approval of KKR’s and Rhône’s Investment Committees.
“If an offer does result, the Board will assess whether it delivers a value proposition that is superior to the expected benefits from management’s renewed strategic plans,” it said.
Last month the Clarke announced the need for the company “to do things differently”, after being forced to write down $260m of debt during this fiscal year.
He said he had already taken significant steps to turn the business around, announcing a $35m cost-saving exercise to offset a 50% rise in consumer marketing spend and minimal inflationary overhead growth. The benefit would be seen in 2015, he said, which would serve as a ‘reset’ year.
In February, the company reported operating profits in the first half of 2014 down 37.6%, on volume down 7% to 15.3 million cases.