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Editor's Viewpoint – Treasury Wine Estates: Here I Go Again On My Own

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The book has been closed – for now – on the end of the plc line for Treasury Wine Estates, following yesterday's announcement that it has called time on negotiations with two separate parties on a possible takeover.

When Kohlberg Kravis Roberts & Co (KKR) and Rhone Capital's joint offer of AUD5.20 per share was joined by a competing proposal (for the same amount) in August, we – along with most observers – started counting down the days until TWE fell into private hands. So inevitable was the purchase that the only surprise was that there were two parties that had expressed interest.

And yet, yesterday, TWE pulled the plug.

KKR and Rhone's proposal followed its initial pitch in May of AUD4.70 per share. This opening shot was turned down on the spot by TWE, and yet the wine company has taken a shade under two months to conclude that the AUD5.20 proposals, which valued the firm at AUD3.4bn (US$3.2bn) “undervalued the company”.

My question is this – what took them so long?

Why did the company's board immediately think that AUD4.70 per share was too low, but that AUD5.20 was more palatable, only to be told – it claims – by “every major shareholder” that the improved proposal “undervalued the company”?

It doesn't strike me as realistic to suggest that TWE's shareholders have a better feeling for the company's value than its board. But, it does strike me as peculiar that, when contacted by just-drinks yesterday, a spokesperson for TWE peddled the “undervalued the company” line. And yet, on a conference call yesterday afternoon, the firm's management flagged “potential regulatory concerns” in the US for the breakdown of one bid and disagreement over price for the other.

Meanwhile, our reporter, Andy Morton, shared his theory yesterday, that perhaps it was actually the private equity gangs that stepped away from the table.

We may never know the truth.

The row-back is particularly brave considering that TWE posted full-year losses of AUD100.9m (US$93.5) last month, off the back of a 5.3% dip in sales. And, with a new CEO in former Coca-Cola Co and Kraft Foods exec Michael Clarke coming on board just six months ago, the company clearly faces a daunting future, whatever plans it has in place to turn things around.

Despite all this, the end of the race for Treasury strikes me as terribly romantic – stepping back out into the sunlight on its own yesterday morning, the company will benefit from an 'us against the world' glow for the next few days. But, it is also fraught with danger, with reputations – both of individuals and of brands – on the line.

I wish them the best of luck.


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