Treasury Wine Estates soars on Chinese takeover speculation

SHARES in Foster's former wine division, Treasury Wine Estates, surged more than 10 per cent to a record high yesterday on reports China's Bright Food Group was considering a takeover bid for the company.

In an announcement to the Australian Securities Exchange yesterday, Treasury cited a Bloomberg report on the speculation of an approach from Bright Food as the likely reason for its sudden share spike.

But it declined to confirm or deny the approach.

Late yesterday, a spokesman for the Shanghai-based Bright Food said the company was not considering a bid for Treasury.

"We have not been negotiating with the Australian company and have not considered any plans to buy it," said Pan Jianjun, general manager of the public relations department at Bright Food.

Bloomberg quoted two unnamed sources close to Bright as saying the Chinese food and dairy producer had held internal talks about a bid for Treasury.

Treasury shares rose as much as 38c to a peak of $3.75, their highest level since the company spun out of Foster's as a separate listed entity on May 11, before closing at $3.67, up 30c for the day.

The growing popularity of Australian wine in China has made it our fastest-growing export market, with annual sales up more than 30 per cent. It is now our fourth-largest market, driving expectation that Chinese investors will show the same interest in wine producers as they have in the Australian resources sector.

Bright has been actively seeking acquisitions outside of its native China, missing out on CSR's sugar division, Sucrogen, last year and a 50 per cent stake in French yoghurt producer Yoplait in March.

Deutsche Bank analyst Paul van Meurs said he was surprised by how much apparent interest has been shown in Treasury and Foster's since the two businesses were separated in May.

However, he conceded Treasury was attractive to potential buyers because it was trading at less than the book value of its assets.

It is likely to see an uptick in earnings as management had taken significant steps to turn the business around, and it has both a strong brand portfolio and market position.

Meanwhile, shares in Foster's, which last month rejected an unsolicited takeover bid from British-based brewing giant SABMiller at $4.90 per share, closed 4c lower at $5.15.

Investors who held shares in Foster's prior to the demerger have made an on-paper gain of 89c a share, or 16 per cent, since the demerger, based on the one-for-three issue of Treasury shares and Foster's final share price of $5.48 prior to the split being executed.

Foster's chief John Pollaers has said the company has not held discussions with SABMiller since the board rejected the takeover proposal, while SABMiller has indicated it is waiting for Foster's to name its price before negotiations can recommence.

However, ING analyst Gerard Rik said he viewed a takeover by SAB as "a done deal", which would provide necessary scale for the acquiring company to wring increased cost savings from its $US1 billion ($930 million) business capability efficiency drive, which is currently under way.