Gaming billionaire James Packer has continued his spending spree, with his investment fund Ellerston Capital nabbing a 5% stake in the Foster’s spinoff, Treasury Wine Estates.
Treasury, Australia’s largest wine group, has been viewed as a takeover target since being spun off from the Foster’s mothership in May last year. Private equity was named as one potential group interested in the maker of Penfolds and Wolf Blass labels.
News that Ellerston Capital, led by Ashok Jacob, had taken a significant stake boosted the stock has raised hopes that the Australian wine industry – which had lost favour because of the global grape glut and the high Australian dollar – might have turned a corner.
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But winemakers are more diffident on the outlook for 2012.
“Things are okay, but it’s a still a difficult climate,” Victor De Bortoli, export manager at the family-run De Bertoli wine group, says.
“For me, it’s an interesting trading environment out there.”
“There’s still a [wine] surplus. There are good growing conditions this year, but exports are slowing and imports are growing. It’s a market where you have to be quick on your feet, which tends to be good for family-run businesses.”
De Bertoli adds that Packer’s purchase might be driven by company-specific changes.
“Treasury has gone through an extraordinary amount of pain, so perhaps those write-downs and write-offs have been realised now and there may be an opportunity for them.”
Justin Cohen, senior reseach consultant at the Australian Centre for Retail Studies at Monash University, says Packer’s splash was likely triggered by a view that Treasury is a “sound” investment.
“Treasury is certainly focusing on its five core big brands, which is a smart move,” Cohen says.
“And I’m guessing that having a successful casino business, he probably has a great understanding of the Chinese market and has seen his wealthy Chinese clients who I’d suspect have had an evolution in terms of embracing wine.
“He’s probably aware that we’re reaching capacity in the Australian market, and with the high Aussie dollar we can’t just sell to the U.S. and Europe anymore; we have to look to developing markest to alleviate the overstock.”
Treasury shares have risen since mid-January, and last traded at $3.80, below last year’s peak of just under $4.
The purchase follows a report by Wine Australia that the average price of exported wine rose through 2011, a result the Government export marketing body described as a “creditable” one, given the Australian dollar soared to record highs throughout the year.
In other mogul news, the acquisitive Sydney manufacturing and distribution company Pro-Pac has entered a trading halt, as it completes a capital raising that is reportedly being supported by members of Melbourne packaging family, the Pratts.
According to The Australian newspaper, Raphael Geminder – the son-in-law of the late packaging billionaire Richard Pratt – will spend $13.6 million in the raising.
Pro-Pac has picked up five businesses over the past seven months, and this week flagged “a “pipeline of significant and strategic acquisition opportunities” to be funded through the $28 million capital raising, and $22 million in increased debt facilities.
Revenue lifted 11.3% to $65.2 million in the six months to December 31 2011, Pro-Pac said, and net profit after tax was up 16.2% to $3.5 million.