Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site. Click here to give us your advice and feedback.

Treasury Wine Estates (ASX:TWE) shares halted for $1.4B US acquisition

Treasury Wine Estates Ltd (ASX:TWE) shares are currently halted as the wine business makes a very large acquisition. 

Treasury Wine Estates Ltd (ASX: TWE) shares are currently halted as the wine business makes a very large US acquisition.

The wine business has a growing global presence with its various brands including Penfolds.

Treasury Wine Estates share price

US acquisition called DAOU Vineyards

Treasury Wine Estates said that it’s going to acquire DAOU, which is a leading US luxury wine brand, for US$900 million, or A$1.4 billion at the current exchange rate.

The company said that this is a highly strategic transaction which fills a “key gap” in the Treasury Americas portfolio at between US$20 to US$40 per bottle and strengthens the existing portfolio above US$40 per bottle.

It also said that it accelerates Treasury Wine Estate’s luxury-led portfolio ‘premiumisation’ focus with the luxury portfolio contributing approximately 50% of global group net sales revenue (NSR) after the acquisition is integrated.

TWE also said that the acquisition will strengthen the company’s growth profile and enhance its NSR and EBITS growth, as well as the EBITS margin (EBIT explained). This could be helpful for TWE shares in time.

The ASX share said that it establishes Treasury Americas as a “leading and iconic and US luxury wine business” and that it “provides the scale to support a future standalone Treasury Americas luxury division”.

In the first full year of ownership, being FY25, the deal is expected to add mid-to-high single digits to profit / earnings per share (EPS).

The deal is expected to be completed by the end of 2023, subject to US anti-trust approval.

How will the deal be funded?

There will be an upfront consideration of US$900 million plus an additional earn-out of up to US$100 million payable in the event that certain NSR targets deliver growth in excess of pre-agreed thresholds from 2025 to 2027.

The upfront consideration is going to be funded with a combination of debt and equity (new TWE shares).

It’s doing a A$825 million capital raising through a fully underwritten pro-rata accelerated renounceable entitlement offer with retail entitlements trading to provide the “fairest possible structure for TWE shareholders.”

There is an A$157 million placement of new TWE shares to the existing owners of DAOU at an issue price of $11.97 per share, with half of these shares subject to a one-year voluntary escrow, with the other half subject to a two-year voluntary escrow. In other words, they can’t sell the shares during those time periods.

TWE also announced a new US$350 million acquisition bridge facility for funding the debt component of the acquisition and related costs.

Final thoughts on TWE shares

The business is making a big move, and taking on a sizeable amount of debt is not ideal when interest rates are as high as they are.

Hopefully the US business it’s buying is high-quality and has a lot of growth in its future because otherwise TWE would be burning a lot of shareholder capital.

I’m not a TWE shareholder, so I’m not sure about how comfortable I’d be with this higher-risk play to expand. But, with Chinese tariffs to be possibly removed in 2024, things are looking up for the business.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.
Skip to content