KKR makes revised $3.2-bn bid for Treasury Wine

In a revised takeover offer, private equity firm Kohlberg Kravis Roberts has offered Treasury Wine Estates $3.2 billion, The Utah People's Post reported.

The Australian vintner, which now holds Penfolds and Beringer Vineyards said it would consider the new offer.

Treasury Wine Estate's board of directors had already rejected an earlier $2.8 billion in April for  undervaluing the company. Following the rejection, KKR brought in a New York equity firm (Rhone Capital), and raised the offer to A$ 5.20 per share. The new offer is 11 per cent higher than the A$4.70 made earlier.

Treasury Wine explained that the board of directors had concluded that future engagements with KKR would be beneficial and would serve the interests of its shareholders. It further said, a confidentiality agreement needed to be agreed upon before any other diligence could be undergone. The possibility of rival bids had not been ruled out, however, and KKR might have rivals in the near future.

The revised KKR offer represented a 41 per cent premium from 15th of April, when KKR first approacched Treasury Wine.

Shares of Treasury Wine had rallied since May as investors foresaw that it would either receive a higher offer from Kohlberg Kravis Roberts or another potential suitor.

According to the Australian company, whose wines ranged from California's mass-market Beringer to premium local labels such as Penfolds, it had granted KKR and Rhone the right to conduct due diligence on an non-exclusive basis, MarketWatch reported.

MarketWach quoted Jamie Nicol, chief investment officer at Brisbane-based fund manager Dalton Nicol Reid, a small Treasury Wine shareholder as saying, the price was getting more reasonable. Nicol added however, that Treasury Wine needed to keep trying to canvass rival bids for either the entire company, or for its struggling US business.

He added, clearly there was still a return available for KKR at this price and ultimately they would do the same thing: divest certain assets.

However, Treasury Wine's decision not to grant exclusive due diligence suggested it remained hopeful that another bid could emerge, according to commentators. According to Ashkay Chopra, an investment analyst at Melbourne-based fund manager Karara Capital, they were still leaving the door open.

Treasury Wine's vulnerability to a takeover increased  in July last year, when depressed sales of cheaper brands such as Beringer forced it to destroy thousands of gallons of wine that had passed its drink-by date and book a related A$155 million write-down.