Treasury Wines Estates is set to announce the purchase of Diageo’s wine assets and a rights issue, sources told Street Talk Online.
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Treasury, which owns major brands including Penfolds, Rosemount Estate and Wolf Blass, will tap investors for Aus$486 million (US$350 million) to help fund the deal.
Brands Diageo is letting go include Sterling Vineyards, Blossom Hill and Piat D’or, as Treasury looks to double its “masstige” (mass prestige) revenues in the U.S.
The deal advances a turnaround plan under Chief Executive Officer Michael Clarke, brought in previous year to rethink the company’s growth strategy after a disastrous foray into the US saw it destroy thousands of cases of unsold low-end wine.
The acquisition “will be a game-changer for our USA brands, providing us with an immediate opportunity to (increase) our growth in the USA, Canada, Asia and Latin America”, Clarke said in a statement. “Wine is no longer core to Diageo and this sale gives us greater focus”. Blossom Hill is one of the leading wine brands in the United Kingdom by volume and value in FY15.
The acquisition of the Diageo wine operations is subject to regulatory approvals, including anti-trust approval in the USA, and is expected to complete in about three months.
TWE says the acquisition is expected to deliver TWE at least US$25m of annual cash synergies before FY20.
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TWE shares are in a trading halt, having last traded at $A6.57.
