KKR moves again on Treasury stock

12 Jun, 2014 08:00 AM
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The company is preparing for two large redundancies tranches in a restructure

UNITED States private equity firm ­Kohlberg Kravis Roberts is understood to have made fresh soundings to major institutional shareholders in Treasury Wine Estates as the wine company prepares to cut about 100 staff by June 30.

New chief executive Mike Clarke is aggressively pushing to cut costs. The company is preparing for two large redundancies tranches in a restructure which may axe slightly more than the 5 per cent of the workforce target ­outlined by the company last month.

About 100 Treasury staff in middle management, administration, logistics and distribution, and some contractors, will be made redundant by the end of June – between 50 and 60 per cent of the broader restructuring, The Australian Financial Review reports.

In the next and final wave of the ­cost-cutting, up to 60 people will lose their jobs by the end of September.

A small number of staff have already left after Mr Clarke outlined a $35 million cost-cutting program on May 20 when the wine group, whose brands include ­Penfolds and Rosemount, rejected an indicative buyout proposal from KKR pitched at $4.70 a share.

Most of the restructuring and ­thinning out of middle management layers is occurring in the United States and Australian operations. A ­substantial portion of the cuts is from the ­company's head office in Queensbridge Street in the Melbourne suburb of Southbank .

It comes as some large institutional shareholders in Treasury have again been approached by KKR and its ­advisers who seek to outline the rationale for its proposal at $4.70 a share.

Mr Clarke explained on May 20 when the company first revealed the confidential proposal from KKR on April 16, that it decided to publicly reveal the approach because it had learned KKR had directly approached some of Treasury's own shareholders.

Mr Clarke and his board were ­worried the "confidentiality" of the KKR proposal had therefore been lost.

The public announcement of the ­previously secret KKR proposal came five weeks after it was received, and also after Treasury had publicly rejected speculation during that five-week period about other potential buyers such as Pernod Ricard and Constellation Brands being involved in possible deals.

Advisers to KKR are thought to have again approached some of Treasury's main institutional shareholders in the past few days.

Treasury's share price has ­continued to soften in the past few days and slipped a further 7c on Wednesday to close at $4.82.

The share price is now in danger of sinking below the $4.70 ­indicative ­proposal price from KKR.

AFR

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