Treasury Wine Estates acquires Diageo’s wine arm

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Drinks: Wines
Other: Business

After several weeks of rumour and counter-rumour, Diageo has confirmed the sale of its wine arm to Treasury Wine Estates for £361m.

As well as gaining two large global brands in Blossom Hill and Piat d’Or, Treasury will also take on Diageo’s Chateau & Estate Wine business in the US, including Beaulieu Vineyards and the well-respected Napa estate Sterling Vineyards.

The move has been predicted for a while, with Diageo – at one time intent on having a presence in every category across the drinks spectrum – increasingly appearing to want to return to concentrating on its core spirits business.

In July this year, it sold the Gleneagles Hotel and Golf Course to private investment group Ennismore, and analysts expect further sell-offs, with Guinness particularly under the microscope.

Since its demerger from the Foster’s portfolio in 2011, Treasury Wine Estates has undergone a rocky few years, with repeated write-downs  and the relatively recent destruction of thousands of cases of unsold wine in the US.

Last year, TWE fended off two speculative bids from venture capital companies on the basis that they significantly undervalued the company.

Since then, however, the group has returned to profit, with a strong strategy that appears to be working, and a board that is united behind it.

In its 2015 Annual Report, it describes its plan as one of moving from an agriculturally-driven organisation to a marketing-based one, focusing on ‘fewer, stronger brands with international reach’.

Wines like Penfolds, Rosemount, Beringer, Wolf Blass and Lindeman’s fit that brief, as, without doubt, do Blossom Hill and Piat d’Or.

While this deal probably came along a year or two earlier than TWE would have liked, it seems that Diageo were keen to off-load, and the offer was too good to turn down.

‘The acquisition of Blossom Hill in Diageo’s UK wine business will provide us with the scale and critical mass to deliver enhanced value creation from our combined commercial business,’ said TWE CEO Michael Clarke. ‘I am confident our combined businesses will deliver both immediate and long term benefits to our shareholders.’

 

About Author

Chris Losh

After five years working on My Weekly magazine (during which time he learned how to write horoscopes and make things out of mince) in 1995 Chris Losh entered the world of drinks writing and, despite all advice from his doctor – and the wishes of most South African winemakers – has stayed there ever since. He began on Wine and Spirit International, editing it for several years before moving on to edit Wine Magazine. Both publications have since gone the way of the Dodo, but he claims to have nothing to do with their demise, and his alibi appears solid, since he was freelance writing for anyone who would pay him at the time. In 2007, he helped to set up both Imbibe magazine and the Sommelier Wine Awards, and has spent much of the last three years eating, drinking, and listening to French sommeliers talk about minerality. In 2009 he was shortlisted for the Louis Roederer Feature Writer of the Year, but didn’t win. Perhaps he should have stuck to horoscopes. And mince.

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