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Treasury Wine rejects bid from KKR

The Age logo The Age 20/05/2014 James Thomson
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Beleaguered wine giant Treasury Wine Estates has rejected a bid from private equity firm Kohlberg Kravis Roberts, claiming the $4.70-a-share bid does not properly value the company.

The bid would have valued the business at $3.05 billion. In early trade, shares in Treasury have shot up 18.9 per cent to be trading at $4.83.

In a statement to the ASX today, TWE said the offer was a "preliminary, indicative" bid that would have been executed by a scheme of arrangement.

The company said in a statement that it was determined to pursue the strategic plan of of its new chief executive Michael Clarke.

"Since commencing as TWE's chief executive officer, on March 31, Michael Clarke has been progressing with plans to improve the company's performance, with a focus on improving brand prioritisation and investment, addressing structural challenge facing the business and reducing overhead costs," TWE said.

"While these plans may drive potential asset impairments, they are fundamental to a turnaround in TWE's short term performance and the company's ambitions to deliver long-term sustainable growth.

"The board has considered the KKR proposal in the context of these renewed plans and concluded that the proposal does not reflect the fundamental value of the company and it is therefore not in the best interests of shareholders."

However, the company also told investors this morning that trading conditions were "difficult, underpinned by intense competitor activity and a challenging retail environment".

"TWE is now in the midst of its most crucial trading period, with the 2014 Penfolds luxury and icon wine collection released earlier this month," Mr Clarke said in a statement.

"While the business is working hard to deliver the previously communicated EBIT guidance range in fiscal 2014, as stated previously, I will not engage in short-term practices to the detriment of our long term objectives."

TWE said that KKR had requested that the proposal - first received by TWE on April 16 - be kept confidential.

But TWE says that it learned last night that KKR had spoken to "one or more of TWE's shareholders" there was a risk the confidentiality of the bid had been lost.

TWE shares last traded at $4.07 and have risen from $3.84 at the start of May.

The company also announced this morning that it will boost consumer marketing investment by 50 per cent.

Earlier this year the company faced sharp criticism over its decision not to participate in major discount and promotions run Coles and Woolworths, which saw sales and market share fall dramatically.

Mr Clark also announced plans to save $35 million by reducing overheads.

Last week the company was forced to deny it had received an offer for its US assets from drinks giant Pernod Ricard.

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