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TWE snaps up top shelf California winery

Business

Treasury Wine Estates has announced a deal to buy luxury Californian wine business Frank Family Vineyards for $432 million as part of its renewed premium focus in the United States.

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The Napa Valley acquisition is the first major purchase by TWE in the Americas after offloading several of its lower end commercial brands in the US earlier in the year.

The producer of several high profile South Australian brands including Penfolds, Wolf Blass, Wynns and Pepperjack, TWE split the company into three divisions – Penfolds, Treasury Premium Brands and Treasury Americas from July 1.

TWE’s new premium North American business aims to generate similar revenues as the region previously delivered, with broadly half the volume over time.

The US$315 million acquisition of Frank Family Vineyards (FFV) will be funded by a combination of debt and cash, including proceeds from the recent US divestments which generated cash proceeds of about $300 million.

The winery is heavily focused on Chardonnay (47 per cent) and Cabernet Sauvignon (32 per cent), which are the most popular wine varieties in the US.

Its retail price points range from US$38 to US$225 per bottle.

FFV also has a tasting room that attracted 30,000 visitors in 2019. A new hospitality venue is set to open next year.

TWE says the deal strengthens Treasury Americas’ credentials as a leading player in the US luxury wine market and fills a key portfolio gap in the large and growing luxury Chardonnay segment.

The company says it will also improve its US share of the luxury Chardonnay market to number three overall and to number two in the US$25 and above category.

FFV was founded in 1992 by Rich and Leslie Frank, who will both remain with the business as advisers.

TWE CEO Tim Ford said the acquisition was another important step towards its ambition of becoming the premium wine market leader in the Americas.

“This is a rare opportunity to acquire a luxury brand and portfolio of wines that consumers enjoy and connect with,” he said in a statement to the ASX this morning.

“This is a compelling strategic and financial investment, comfortably meeting our investment criteria and one we expect will deliver attractive growth and financial returns for TWE’s shareholders over the long term.”

Australia’s largest listed winemaker, Treasury Wine Estates has staved off the global coronavirus pandemic and crippling Chinese tariffs to report a $250 million net profit for the 2020-21 financial year.

The result was up 1.8 per cent on the previous year but more than $100 million short of the $356 million profit it reported in 2019 at the peak of the recent wine boom.

TWE’s share price was up 26 cents following this morning’s announcement to $11.52 at noon.

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