ROSS Wilson, the ex-boss of Southcorp who in the 1990s bought Treasury Wine Estates’ most important brands from the Adsteam wreckage including Penfolds, believes the US private equity firms now gunning for control of the winemaker could be just what the local industry needs to repair withering brands and improve pricing.
But that doesn’t mean Mr Wilson won’t be saddened about Treasury Wine falling into foreign clutches.
"It would be sad to see an iconic Australian brand going overseas, and I think Treasury has the best wine portfolio in the world, wonderful brands, and it would be a jolly shame to see that disappear overseas."
However, not a stranger to the private equity handbook, further down the track Australians may once again get a chance to buy back the family silver - albeit perhaps at a higher price.
"It would be disappointing to see a fantastic company like that be taken out by private equity. But presumably it will come back on the market in two years' time as a listed entity, so maybe there will be a chance for people to get back into it again," Mr Wilson said.
Mr Wilson, who is also a former chief executive of wagering group Tabcorp and now runs his own winery in Victoria’s Yarra Valley with his wife, said the only way the consortiums who have lobbed billion-dollar bids for Treasury Wine can make their money back would be by investing heavily in the brand equity of key wines, particularly Penfolds and Lindemans. And he reckons the whole sector would benefit from that.
"They [private equity] obviously see value in regenerating the value, in particular those two brands," Mr Wilson said, speaking from a yacht in the Whitsundays. "Now how do they do it? Goodness knows right now, but I think if they do do it it’s good for the Australian wine industry because we get some strength back into the top end of the wine industry".
"And I hope that strength, which is basically in pricing, will flow through the rest of the Australian wine industry."
Mr Wilson has an intimate knowledge of some of Treasury Wine’s most important and profitable brands.
As the boss of SA Brewing in 1990 he paid $410 million for Penfolds and a collection of other top wine brands from the billion-dollar wreckage of failed conglomerate Adsteam. That portfolio was eventually absorbed into Foster’s and then spun out in 2011 to form Treasury Wine The company now faces two competing takeover bids, one from the legendary private equity firm Kohlberg Kravis Roberts and a fresh one pitched just last week by an unnamed group presumed to be TPG Capital. Both proposals are pegged at $5.20 per share, valuing Treasury Wine at $3.4 billion.
"It’s a big multiple, and all you can think of is that somehow they are going to recreate the brand value, which has obviously diminished significantly over the last 15 years or so," Mr Wilson said.
"They will have to do a lot of work to develop their brand strength, otherwise how are they going to make the profits to justify the price they are paying?"
He said the local winemaking industry could ultimately benefit from the leadership of a large private equity owner as it transforms Treasury, the biggest listed wine group in the world.
"The issue we have had for a long time is that we just don’t have a serious big player who stands up and develops their wine brands, and develops products, they will have to do that."
Treasury Wine has allowed KKR and its partner Rhone Capital to conduct due diligence on the business. It will release its full-year result to the market on August 21.
Treasury boss Mr Clarke has moved quickly since his appointment in February to shed costs at the winemaker and invest in leading brands like Penfolds.