Treasury Wine Estates acquires Diageo's wine arm

Chris Losh

Chris Losh

14 October 2015

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.’

 

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