Treasury Wine Writes Off Assets After $2.9 Billion KKR Offer

Treasury Wine Estates Ltd. (TWE), the Penfolds Grange winemaker that KKR & Co. approached in April with a A$3.05 billion ($2.9 billion) takeover bid, wrote off about 8 percent of its assets amid a business review.

The company will make an impairment of as much as A$260 million in the year ending June 30 as a result of overpayments for previous acquisitions, slowing sales of cheap wine, and writeoffs of brands and property. It had A$3.14 billion in net assets at Dec. 31, according to data compiled by Bloomberg.

Removing the value of brands that Chief Executive Officer Michael Clarke has vowed to winnow will tighten the focus on Treasury’s earnings potential and inventory of cellared wine amid the takeover interest. Treasury shares closed at A$4.83 yesterday, above KKR’s spurned A$4.70-a-share bid, and the company may be of interest to Pernod Ricard SA, Constellation Brands Inc. (STZ), or TPG Capital, according to White Funds Management and Pengana Capital.

The writedown “further highlights the need for TWE to do things differently,” Clarke said in a statement. “The current business model is not being optimized.”

Melbourne-based Treasury will also change the release dates of some Penfolds vintages from March and May to October. That will allow the bottles to be shipped during the cooler southern winter in time for Christmas, as well as giving winemakers time to focus on the Australian grape harvest which runs through February and March.

Photographer: Carla Gottgens/Bloomberg

An employee operates a scissor lift in the red barrel room at Treasury Wine Estates Ltd.'s Wolf Blass winery in the Barossa Valley, Australia. Treasury wine decided to reveal the offer after learning yesterday that KKR and its advisors had talked to one or more of its shareholders. Close

An employee operates a scissor lift in the red barrel room at Treasury Wine Estates... Read More

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Photographer: Carla Gottgens/Bloomberg

An employee operates a scissor lift in the red barrel room at Treasury Wine Estates Ltd.'s Wolf Blass winery in the Barossa Valley, Australia. Treasury wine decided to reveal the offer after learning yesterday that KKR and its advisors had talked to one or more of its shareholders.

The company will also spin off its Australia commercial wine business, which focuses on cheap bottles, into a unit separate to higher-priced brands.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editors responsible for this story: Stephanie Wong at swong139@bloomberg.net Iain McDonald, Chris Bourke

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