Barbarians at the Grape: New KKR bid for Treasury Wines

One of the world’s major wine producers is back on the market. Treasury Wine Estates (TWE), which owns important wine brands including Penfolds and Wolf Blass, has agreed to open its books to private equity firm Kohlberg Kravis Roberts & Co. (KKR) which has placed a $3.4bn Australian dollar takeover bid (£1.88bn) on the company. TWE, which is Australia’s biggest listed wine company, rejected a previous bid in April this year; the current bid is 11% higher and the TWE board is urging its shareholders not to dismiss it outright.

KKR may be best known for their 1989 leveraged buyout of RJR Nabisco, at the time the largest takeover of its kind, which became the subject of the best-selling and influential book Barbarians at the Gate. A lot will hinge on whether KKR likes what it sees when it examines TWE’s accounts – there are also likely to be rival bidders, such as US-owned Constellation Brands, the world’s biggest winemaker.

Of most relevance to us at Vin-X is the Penfolds brand which makes Grange. Probably Australia’s most famous and revered wine, Grange has received scores of up to 100 points from Robert Parker’s Wine Advocate and is considered by some in the market as having investment potential. We have yet to be fully convinced, given the generally low levels of liquidity for Australian wines, but we remain open-minded if there is a good opportunity for our clients. We will always keep an eye on developments; whether a successful KKR bid will affect the global standing of the Grange brand remains to be seen.