World news – Pernod Ricard is said to have considered taking over Treasury Wine


Shares in troubled Australian Treasury Wine Estates rose more than 7% today on unconfirmed rumors that they had received a takeover bid.

Reports that emerged overnight in London indicated Pernod Ricard as Applicants to, but Treasury, Australia’s largest producer, has not commented on them. A spokesman for Pernod Ricard said the company had « no comment » on the speculation.

Treasury shares rose to AU $ 10.31 on speculation that they had received an offer worth approximately £ 5 billion . They halved to under AU $ 8 late last year after China imposed tariffs of up to 212% on wines from Australia, effectively closing the market.

The People’s Republic has been the largest export market in the country for the past five years Treasury Department, accounting for more than a third of its overseas sales.

As a result, the Treasury Department was forced practically overnight to reorganize its business plan and try to increase sales in other markets for the huge stocks it was trying to divert increase. CEO Tim Ford has pledged not to dump wine at bargain prices and is trying to reorganize production contracts and facilities.

Treasury, whose flagship is Penfolds, recently reported net income after tax of $ 175.3 million. AU $ (£ 98 million) for the half year ended December. Earnings before interest, taxes, depreciation and amortization were AU $ 284.1 million.

Observers were not surprised by the news of the potential offer due to the Treasury’s vulnerability and the low share price. Rumor has it that the applicant is offering payment of AU $ 15, which is a significant premium to the current price but is still below the level at which Treasury Department stocks were at the end of 2019, prior to the coronavirus and China embargo However, some wonder whether an American private finance group could be a more likely bidder than Pernod Ricard.

While there is no doubt that the French giant could afford such a deal, it would suggest a change in strategy .

It has made no secret that its primary goal is to increase its penetration and profitability in the lucrative North American market. About 29% of Pernod Ricard’s profits come from North America (compared to nearly 40% at Diageo). Therefore, the company wants to increase its share of the local spirits market and continue to promote what the chairman and managing director Alexandre Ricard calls the « agave room ».

The company already has a strong stake in Australian wines through its Jacob’s Creek range, but Treasury is facing increasing problems in the United States, where many of its wines have been viewed as overpriced in the commodity sectors of the market. Attempts have been made to outsource some brands and cut their own US winery operations.

A deal would add Pernod Ricard to its portfolio, but it would make more sense if it (or another applicant) could see a way of doing business in Australia to further rationalize at the same time as selling through the commodity lines. Penfolds would be a prestige acquisition, but not at any cost.

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