The fat lady has appeared onstage to serenade Treasury Wine and the only question now is the company’s final sale price.
TWE chair Paul Rayner has opened the door, signalling he would be prepared to accept KKR’s $5.20-a-share bid but is hoping to shake out a competing bid to lift the price.
One can presume he has not been flooded with rival bids significantly above this price but we will avoid the temptation to declare the game over quite yet.
Not so Credit Suisse analyst Larry Gandler who on July 24 opined that the $4.70-a-share KKR bid was “unlikely to eventuate “ and stock should trade closer to his DCF valuation of $3.15 a share.
The good news for TWE shareholders is Gandler made the wrong call and KKR with joint venture partner Rhone Capital thinks TWE is worth $5.20 or an equity value of $3.4 billion.
This deal would be the first major wine investment for KKR globally and it would also be the first Australian buyout for a while after a series of missteps at Perpetual, Healthscope et al.
TWE is due to release its results on August 25 and KKR obviously wanted to put its head under the hood before the latest numbers become public.
The key interest here will be trading performance because TWE boss Michael Clarke has admitted the key reason he met forecast earnings was the success of a big Penfolds wine promotion which led to retailers buying stock ahead of the promotion, which started last month.
A lower $A will also boost the value of its exports.
Treasury was split from the Fosters beer division in May 2011 not long after the company had taken another $1.3 billion from its then $3.1bn valuation, leaving the book value at $1.8bn.
The old guard had previously slashed the valuation in half to $3.1bn after a troubled past since the 2005 acquisition of Berringer.
The stock traded up as high as $6.47 a share in May last year.
If the deal proceeds as planned David Crawford and his team at Fosters would be vindicated in their decision to split the company back in 2011 because shareholders will now get double their money.
KKR has timed its bid to perfection with Treasury poised to recoup an expected bumper couple of years from Penfolds.
The 2011 vintage was not great but 2012, which will be released this year, was a boomer.
To compound the vintage issue, Paul Rayner had the bright idea of leaving the company without a boss for a crucial eight months or so after sacking David Dearie, then putting a former Chlorox executive, Warwick Every Burns, in charge of the wine division and belatedly installing Michael Clarke as boss.
KKR stepped into the gaping hole so kindly left by Rayner’s incompetence.
Now it’s a matter of whether any higher bid materialises or will KKR emerge with the prize at or slightly above $5.20-a-share.