Chinese deny wine takeover plans

SHARE PRICE RECORD: Treasury Wine Estates has been the subject of takeover speculation. Picture: Bloomberg Source: Bloomberg

SHARES in Foster's offshoot Treasury Wine Estates hit a record yesterday on renewed speculation Chinese giant Bright Food Group was preparing a takeover tilt.

Treasury shares soared more than 11 per cent before easing to a record close of $3.67, up 8.9 per cent, after a Bright Food spokesman told Bloomberg on the weekend it wanted to buy Australian wine assets.

But Dow Jones was reporting late yesterday that Pan Jianjun, the head of Bright Food's public relations, was denying the Chinese company had been negotiating with Treasury or even had considered any plans to buy it.

In response to a "please explain" note from the ASX, Treasury said it was "not aware of any unannounced information" that explained the company's unusual share price movement.

However, it said it was aware of "unnamed sources ... speculating that the Bright Food Group is considering making an offer".

Over the past several years the Chinese food conglomerate has been on the hunt for acquisitions in Australia, but with little success.

A marathon $1.75 billion bid for CSR's sugar operation failed last year when it suffered a last-minute trumping by Singaporean commodities trader, Wilmar.

Then about a year ago - before Treasury split from Foster's - it was rumoured to be running the ruler over Treasury's Rosemount wine brand.

It did, however, sign a memorandum of understanding with the previous New South Wales government to "invest in the sugar, dairy and wine industries".

As with Foster's beer business, presently the target of a $9 billion takeover approach from SAB Miller, the wine business has previously been subject to takeover interest, including last September when Foster's rejected a private equity bid of up to $2.7 billion for the business, saying it undervalued the assets and their potential.

Despite selling out of the Australian wine market earlier this year, the chief executive of US beverages giant, Constellation Brands, told Reuters in May it would consider buying Treasury.

But one market observer yesterday said the wine industry was on the nose across the world.

"Wine has proven to be an extremely challenging industry, globally," the observer said.

He said there appeared to be no obvious buyer for Treasury, with any valuation "very, very sensitive" to the high Australian dollar and the global wine glut.

And yesterday's share price rise meant the company was effectively fully valued, he said, leaving little room for any acquirer to offer shareholders much of a premium, with $4 a share the upper limit.

"A potential acquirer would have to have some very strong views to justify paying such a premium," the observer said.