Beringer spin-off heard on grapevine
AS Foster's Group shareholders prepare for this morning's Melbourne meeting to approve a cure for a hangover that has lasted the better part of 15 years, already the focus is starting to shift to the next deal.
No, it's not an imminent takeover offer for either of the beer or wine operations in their entirety -- the soaring Australian dollar, combined with a strong stock price, has taken care of that for now. What investors are talking about is an old idea that could further simplify the wine business and generate some value sooner rather than later: a sale or spin-off of the Beringer wine business that makes up roughly half of the $2.96 billion wine division, Treasury Wine Estates.
The fact TWE chief David Dearie has indicated a willingness to rationalise brands has led the market to believe he may also be open to divesting Beringer, which Foster's picked up from Silverado Partners and private equity group TPG for $US1.2bn in 2001.
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The sale of Brown Forman's Californian assets to Vina Concha y Toro last month for $US238 million and private equity player CHAMP's purchase of Constellation Brands' assets for $230m in December are proof of increasing appetite for wine assets. The idea is that while a bid for the entire wine business may be too big, something like Beringer might be an easier pill to swallow.
TPG, which last year considered a joint proposal for the entire wine business along with KKR, is an obvious one to target as a potential buyer. That chatter has persisted for two years, since a group of former Beringer executives, including a former Foster's chief financial officer Pete Scott, formed a winery investment group backed by TPG to assemble a portfolio of boutique Californian labels.
Combining Beringer with Constellation Brands operations would also create savings. And you couldn't rule out buyers from China, which is increasingly interested in food and beverage assets offshore. But the currency is likely to be a major issue. The demerged businesses are tipped to trade strongly, initially at least. While the demerged business would trade at a valuation reflective of the currency, anyone looking for a quick move on Beringer or other assets should have a wine and a lie-down.
Gunns value lost in Triangle sale
A MONTH past the deadline Gunns set itself for an agreement on the sale of forestry land in the Green Triangle on the South Australia-Victoria border, it remains optimistic of finalising the auction by the end of June.
Industry sources aren't so sure about the price. Gunns has the assets on its books at $254 million but word is it's more likely to get about $100m-$150m for the land.
ANZ Corporate Advisory is conducting the sale for Gunns and a number of parties are thought to have signed confidentiality agreements. US group GMO Resources and Sydney-based timber investment company New Forest are the two most logical buyers.
GMO bought three-quarters of the pine plantations formerly owned by Auspine in the Green Triangle for $173m in 2009 and New Forests partnered Canadian pension fund Alberta Management Investment to buy Great Southern's timberland for $415m in January. New Forests, which raised $500m for its Australia-New Zealand Forest Fund in October last year, is still thought to have about $400m of buying capacity.
Sale of the assets is unrelated to Gunns' search for a financing partner for its $2.3bn Bell Bay pulp mill -- slated to start construction in August -- but finalising the auction will further strengthen its battered balance sheet, perhaps giving more comfort to a potential co-investor. Gunns chief Greg L'Estrange remains in discussions with possible financiers but needs to get a move on if he doesn't want to let another deadline slide.
No sweat for Telstra on NBN delay
INVESTORS are grappling with the lapsed deadline for Telstra to approve the $11.3bn National Broadband Network deal.
Originally expected in mid-year, it's now not looking likely until December.
Merrill Lynch analyst Sameer Chopra expects a definitive agreement to be signed in June and competition approvals are set to take another five months.
The broker estimates the delay will help Telstra's retail market share as it reduces the scope of NBN-related line loss.
Elsewhere, Deutsche Bank has continued to reap the benefits of last year's purchase of a 49.9 per cent stake in Craigs Investment Partners, one of New Zealand's largest private wealth and investment managers.
In quiet times like these, any deal is a good get and Deutsche yesterday moved to the top of the league tables in New Zealand equity capital markets with a $NZ350m ($257.5m) capital raising for Contact Energy.
Goldman Sachs was joint underwriter for the deal, which hands Contact's controlling shareholder, Origin Energy, its full entitlement. Of course, the big game in New Zealand is the coming government privatisation program, and banks are positioning for the work.