DataRoom AM: Circling Treasury Wine

Treasury Wine Estates suitor Kohlberg Kravis Roberts (KKR) has received the backing of a cashed-up offshore pension fund as it persists with a pursuit of the Australian winemaker, but there are still a few hurdles on the path to a deal.

Elsewhere, Qantas Airways falls short on its foreign investment push, PanAust attempts to drum up competition to Guangdong Rising Assets Management’s takeover offer and Menora Foods mulls an ASX listing.

Canada Pension Plan Investment Board is backing private equity firm KKR on the latter’s bid for control of Treasury Wine Estates, according to The Australian Financial Review. KKR saw its $3.05bn offer rejected by TWE two months ago and reports suggest progress on a revised deal is slow despite the support from CPPIB and other unnamed offshore firms.

While getting Treasury onside has proven a challenge, KKR is also concerned about US antitrust laws, which prevent manufacturers of alcohol products from owning distributors of such product. The AFR reports that KKR may be close to securing a buyer for TWE’s US assets, which will offset this issue and potentially pave the way for a higher offer.

In aviation, Qantas Airways has failed in its push for major changes to the Qantas Sale Act. Instead, the airline will see minor tweaks to the Act that will enable foreign ownership in the order of 49 per cent. It is a minor win, but unlikely to draw the kind of investor interest Qantas was seeking in order to counter the competitive threat from rival Virgin Australia, which is now largely controlled by three foreign airlines.

The news comes as a report from Reuters indicates the airline is mulling a sale of its 49 per cent stake in Jetstar Asia to Lion Air Group. The news service suggested talks were at an early stage, while Qantas dismissed the claims as “speculation”. The national carrier is preparing to update the market on its strategic review next month and a number of potential asset sales are rumoured to be under consideration.

In resources, takeover target PanAust has refuted claims suitor Guangdong Rising Assets Management (Gram) is ready to walk away from its $1.5 billion bid, which PanAust has dismissed as an undervaluation. While Gram, the firm’s largest shareholder, persists with due diligence, PanAust has opened its books to other prospective suitors in the hope of drawing a higher offer. There is a lack of confidence in the market, however, with the copper miner’s share price now almost 5 per cent below Gram’s offer price.

Meanwhile, Menora Foods has tapped CIMB and Moelis & Company for a strategic review that could lead to a sale of the business or a float on the ASX. The distributor of Cobram Estate olive oil, among a host of other food products, said it had already received takeover offers, but it may be more tempted by an IPO should the market remain strong until the completion of the review.

Another potential IPO candidate is ArcPac Building Products, which the AFR reports could hit ASX boards this year. Garage door and window maker ArcPac is owned by private equity firm Crescent Capital Partners and is tipped list with a $200 million valuation.

Elsewhere, Boart Longyear continues to be haunted by rumours of a bankruptcy. The latest speculation surrounding the once high-flying drill rig supplier is that it has hired KordaMentha and Ashurst to assess drastic options to avert collapse.

Finally, Hastings Fund Management has divested its 25 per cent stake in a Texas LNG plant for $1.2bn, freeing up cash for more infrastructure investments.