TWEs portfolio includes Wolf Blass

TWE's portfolio includes Wolf Blass

It's an awkward moment in any relationship, bringing the object of your affections home for the first time.

No matter how much you clean the house, there's always the potentially embarrassing clues to your real self littered about the place, be it the comedy mug, the pink hand towels or the Scarlett Johansson “tribute” wall.

What's more awkward, though, is if your guest, after a few minutes of nosing around, decides they don't like it much and walks out.

Is this what has just happened to Treasury Wine Estates?

The owner of the Wolf Blass and Penfolds Australian wine brands today said it had pulled out of negotiations with two potential takeover partners, the private-equity team of Kohlberg Kravis Roberts & Co (KKR) and Rhone Capital and another, unnamed, private-equity group.

In a call with analysts and journalists today, CEO Michael Clarke put an optimistic slant on the affair, saying the decision to end talks was TWE's. Clarke also said the whole process, which involved opening the books to the two private-equity groups, had “pressure tested” his turnaround strategy for TWE - he even suggested that one of the bidders, while starting out with very different plans for the company, had eventually come around to his way of thinking after carrying out its review. 

A less optimistic view, of course, is that the private-equity groups carried out a thorough inspection of TWE's finances and, with their keen eye for profitability and value, found neither, certainly not at the AUD5.20 (US$4) per share asking price.

Indeed, Clarke said that based on conversations with half of TWE's shareholder interest over the past month, he now believes AUD5.20 is too low a price, and one that would not have passed a shareholders vote even if an offer had been made. This raises the question - and a journalist on the conference call did exactly that - of why the board accepted the private-equity interest in the first place if a bid at the asking price was going to be vetoed. Clarke sidestepped with a reply about how the company has "learned a lot".

So, on one-hand we have owners that see additional value in their stock and on the other potential suitors that appear unwilling to match even a low-ball offer. It's a situation not unheard of in business. However, for TWE, which a few weeks ago seemed keen to sell, it means it will be some time before any more potential partners come knocking at its door.