The world’s largest listed vintner, Australia’s Treasury Wine Estates, on Wednesday further boosted its reach by buying the American and British-based wine operations of drinks giant Diageo for $US600 million.
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TWE also said that the deal means it avoids US$80m of capital investment that would have been required to replace its existing leased bottling facility in the US.
Since chief executive officer Michael Clarke assumed the role at Treasury previous year, the company has been repositioning itself toward the premium end of the market, with a view to dropping underperforming commercial brands.
Diageo’s U.S. wine business comprises approximately four million cases of wine for FY15.
Diageo’s United Kingdom wine business comprises about five million cases of wine, sold in Great Britain and 28 other markets.
The acquisition is subject to certain regulatory approvals, including anti-trust approval in the United States and is expected to be completed in three months.
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.
Treasury Wine also announced an improved financial outlook with better sales and earnings performance in the first quarter of 2016.
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TWE says the acquisition is expected to deliver TWE at least US$25m of annual cash synergies before FY20.
