Treasury Wine Estates Ltd said it is considering a demerger of the Penfolds business and associated assets into a separate company listed on the ASX by the end of calendaryear 2021.
A potential demerger help create incremental long-term value by allowing one team to focus on driving the luxury Penfolds multi-country of origin portfolio (Australian, French and US sourced propositions) while a separate team focuses on accelerating the mix-shift towards Luxury in New TWE1 while also reducing and right-sizing the Commercial portfolio.
Michael Clarke, Chief Executive Officer of TWE said, “Penfolds accounts for approximately 10% of our volume, but well over half of our earnings, with unique resources and a differentiated execution focus compared to the remainder of our business.
A potential demerger would enhance New TWE’s and Penfolds’ ability to pursue their own strategic priorities and deliver a stronger long-term growth profile under separate teams and ownership structures, in addition to enabling investors to more appropriately assess the fundamental value of the brand and its assets.”
New TWE would remain the largest globally integrated wine platform in the world, with a diversified sourcing footprint, diversified end markets and significant opportunity ahead of it to continue the growth of its iconic brand portfolio across all markets. Penfolds is an icon of Australian luxury, with impressive margins and significant growth runway in Asia and globally.”
If the potential demerger were to be implemented, TWE shareholders would own a share in Penfolds and in New TWE proportional to their existing TWE holdings.
The potential demerger remains subject to a detailed evaluation of the costs and benefits to shareholders, along with final Board, shareholder and regulatory approvals and the receipt of third party approvals on satisfactory terms. Subject to the stabilization of market volatility and the global COVID-19 pandemic, if a decision is made to proceed and is approved by shareholders, the potential demerger is expected to be completed by the end of calendar year 2021.
If completed, it is anticipated that the potential demerger would create a new top ASX 50-100 company listed on the Australian Securities Exchange for Penfolds and an ASX 100-150 company for New TWE.