Shareholders in Treasury Wine Estates, owners of premium brands such as Penfolds, are riding an investor’s rollercoaster with shares at new highs, one takeover bid ruled out, but the prospects of another still alive.
TWE shares closed yesterday at $5.25, well up on the $3.50 it traded at just seven weeks ago.
The price surge came in two waves – one in the lead up to the public revelation of a takeover proposal (when it topped $4.10) and then a second after the proposal was announced.
Now, company chairman Paul Rayner has written directly to the winemaker’s shareholders, telling them the board would take no further action relating to Kholberg Kravis Roberts’ $3.05 billion takeover bid.
KKR put its $4.70 cash per share offer to the board on April 16 but it was only revealed on May 20 after Treasury became concerned confidentiality surrounding the deal may have been lost.
“As you may be aware, the Board of TWE announced on 20 May 2014 that it had rejected a preliminary, indicative, non-binding and conditional proposal from KKR to acquire all of the shares in TWE at a price of $4.70 cash per share,” Rayner said in his letter Monday.
“Your board spent considerable time evaluating the proposal in the context of the Company’s plans to drive growth and profitability.
“We concluded that the proposal did not reflect the fundamental value of the company and that it was therefore not in the best interests of our shareholders.
“As a result, we do not intend to take any further action in relation to this proposal.”
While the company will now proceed with its recently announced strategy to fund an increase in consumer marketing with a comprehensive program to reduce overheads and costs of $35 million, it remains open to offers.
“Your board remains focused on maximising shareholder value. As such, we will carefully consider any future proposal that is consistent with this objective, but we will not support a proposal which does not compensate shareholders sufficiently for the value of their shares.”
With the prospects of a future bid still on the table, shareholders can expect price to remain high.
