Treasury Wine Estates acquires Californian luxury wine vineyards for $900M - TechInvest Magazine Online

Treasury Wine Estates (ASX:TWE) has entered into arrangements to acquire 100% of DAOU Vineyards for an upfront consideration of US$900 million, plus an additional earn-out of up to US$100m payable in the event that certain NSR targets deliver growth in excess of pre-agreed thresholds from CY25-272.

• DAOU is a highly acclaimed luxury wine brand based in Paso Robles, California, and is the fastest growing luxury wine brand in US Trade over the past year

• The acquisition accelerates TWE’s focus on luxury-led portfolio premiumisation to approximately 50% of global Group NSR, with immediate accretion to key operating metrics, and creates a leading and iconic US luxury wine business through the combination of Treasury Americas and DAOU

• DAOU fills a key Treasury Americas portfolio gap at US$20-40 per bottle and strengthens the existing luxury portfolio above US$40 per bottle

• Provides the scale to support a future standalone Treasury Americas Luxury division

• The Acquisition is expected to be EPS accretive (pre-synergies) and mid to high single digit EPS accretive (pro forma for cost synergies of US$20m+) in F25, the first full year of ownership4

• Acquisition to be funded via a A$825m equity raising by way of a fully underwritten pro-rata accelerated renounceable entitlement offer with retail entitlements trading a A$157m placement of new TWE shares to be issued to the existing owners of DAOU, and US$311m of debt with the establishment of a new US$350m acquisition bridge facility

• Proposed funding mix results in pro forma leverage at Jun-23 of 2.5×6, with strong cash flow to support deleveraging from 2H24 and back within TWE’s target range of 1.5-2.0x by the end of F25

The acquisition results in material cashflow benefits arising from the ability to deduct the amortisation of goodwill over a 15-year period for US tax purposes. Indicative NPV of cash benefits of ~US$100m with an average annual cash flow benefit of US$12m9.

Implied EV/CY23e EBITDAS multiple of 12.8×10. Adjusting for the NPV of the tax benefits and pro-forma cost synergies reduces this to 8.9×11.

TWE’s CEO, Tim Ford, said the acquisition is expected to be EPS accretive (pre-synergies) and mid to high single digit EPS accretive (pro forma for cost synergies of US$20m+) in F25, the first full year of ownership.

We are delighted to welcome the DAOU brand to TWE, including its award-winning portfolio, experienced leadership team and aligned culture,” Mr Ford said.

“The acquisition reflects the continuation and acceleration of our luxury-led portfolio premiumisation strategy with the luxury portfolio now contributing 50% of Group NSR and the quality of TWE’s and Treasury Americas operating metrics improving immediately and in the future.

“The combination of Treasury Americas and DAOU creates a leading luxury wine business in the United States, the world’s largest luxury wine market which is growing strongly, with an unparalleled portfolio of highly acclaimed and admired Luxury brands.

“We continue to see strong long-term growth trends for luxury wine in TWE’s key global markets, with a significant value creation opportunity leveraging and building on the strengths today of TWE, Penfolds, Treasury Americas and DAOU to create a multi- brand global luxury wine business of scale.”