Stags toast small gain from wine listing

FOSTER'S former wine business Treasury Wine Estates generated a small stag profit for shareholders on its first day of trade, but was still valued below the price offered by private equity bidders last year.

Shares in TWE, which have been issued to Foster's shareholders at a rate of one for every three Foster's shares held, yesterday made their debut at $3.21 apiece, in line with market expectations, and reached a peak of $3.32 during afternoon trade.

When taken together with Foster's peak price of $4.61 during the session, the aggregate value to shareholders was $5.72 for each share held before the demerger.

When compared with Foster's closing price of $5.48 per share on Monday, this meant the demerger effectively added as much as 24c in value for every share in Foster's held by shareholders before the split, an uplift of 4.3 per cent. UBS analysts said they expected Treasury to trade in a range of between $3 and $3.50, while Foster's was expected to trade at about $4.50 per share.

Analysts have said the demerger makes both Foster's and Treasury more attractive targets for a possible takeover bid, with private equity and trade buyers having expressed interest in both companies.

At yesterday's peak share price, TWE's market capitalisation was $2.15 billion -- well below the $2.89bn net asset value it commanded at the end of December, according to pro-forma accounts prepared as part of the demerger.

This valuation was also short of the $2.3bn-$2.7bn that US private equity firm Cerberus Capital offered for the business in September, only to be rejected by the Foster's board as undervaluing the company and its growth prospects.

TWE managing director David Dearie said TWE would be able to better concentrate on growing its wine business now that management would not be distracted by the presence of the Foster's beer division, which was not as vulnerable to agricultural cycles as wine. "It's a longer-term equation in the wine business, where you go from oversupply to undersupply, and your raw materials are grapes. We (at Foster's) never really understood the business of wine," he said.

TWE would focus on building its market position with leading brands such as Penfolds and would target growth markets including China, he said.

"This is a really exciting day for us, but it's day one of a journey," Mr Dearie said.

"It's up to the market to value our shares."