Treasury Wine Estate’s strange way to sell its business
Did Treasury’s board take the decision to put the company up for sale without consulting its major shareholders? Looks like it.
The board of Treasury Wine Estates, the former wine unit of the Foster’s Group, on 29 September 2014 officially terminated talks with private equity firms Kohlberg Kravis Roberts and TPG Capital about a potential AUD 3.4 billion (EUR 2.4 billion) buyout of the company, after deciding that a price of AUD 5.20 per share undervalued the company. The decision comes five months after an original buyout proposal was made by KKR.
Treasury’s Chairman Paul Rayner said the company had consulted a wide range of institutional shareholders making up about half of the Treasury share register and they were universal in their view that AUD 5.20 wasn’t enough to justify a change of control.
Mr Rayner also said the board had decided that the company’s own fix-it plan under the new(ish) CEO Mike Clarke were a better bet.
Australian media quipped that shareholder democracy has ruled the day. This was good news. The bad news was, though, that the board seems to have less faith in its own ability to extract value from the company under its current management than do the shareholders.
However, ending the discussions with private equity companies is a major embarrassment for the board which has spent most of the year lifting the company’s financial skirts – a process that would have surely distracted the current management.
As wrote The Age newspaper: “One thing is for sure – the company’s relatively recently appointed chief executive, Michael Clarke, has the support of shareholders to pursue his turnaround plan. It’s all about reducing overheads, investing in marketing and ploughing money into the high end better performing brands and even making some acquisitions. Cynics would question whether this company will be an easy one to turnaround given its appalling record of under-performance for many years.”
Trust Treasury’s turn-around saga will not be over any time soon.
