Treasury Wine Estates says its acquisition of the Californian DAOU Vineyards for US$1 billion will see its luxury portfolio account for more than 50 per cent of global sales as well as strengthening its Treasury Americas business.
The upfront buyout is US$900 million, with an additional earn-out up to US $100 million if certain revenue targets deliver growth above the pre-agreed thresholds from CY25-27.
TWE said the acquisition will be funded by an AU$825m equity raise through a fully underwritten pro-rata accelerated renounceable entitlement offer with retail entitlements trading. There will be an AU$157m (US$100m) placement of new TWE shares to the existing DAOU owners at a share price of $11.97 per share, with 50 per cent subject to a one-year voluntary escrow and the remaining 50 per cent a two-year escrow. And a US$350m acquisition bridge facility with an 18-month term to fund the debt component of the deal and costs.
TWE said material cashflow benefits will arise from the ability to deduct the amortisation of goodwill over a 15-year period for US tax purposes, with indicative net present value (NPV) of cash benefits of around US$100m with an average annual cash flow benefit of US$12m.
Based in Paso Robles, California, DAOU was founded in 2007 by Georges and Daniel Daou. It's portfolio falls across five product tiers, including its premium luxury label Patrimony.
According to Circana Market Advantage, DAOU was the fasted growing luxury wine brand in US Trade over the past year.
In CY23, DAOU is forecast to deliver net sales revenue (NSR) of US$212 million, earnings before interest and taxes (EBIT) of US$63 million and an EBITS margin of 30 per cent. DAOU has an outstanding track record of growth, with three-year NSR and EBITS CAGR of 45 per cent and 61 per cent respectively.
Its addition to TWE will see Treasury Americas’ Luxury portfolio grow from 38 per cent to 53 per cent of its net sales revenue, and globally from 43 to 49 per cent.
CEO Tim Ford said the combination of Treasury Americas and DAOU creates a leading luxury wine business in the world’s largest luxury wine market.
“We continue to see strong long-term growth trends for luxury wine in TWE’s key global markets, with a significant value creation opportunity leveraging and building on the strengths today of TWE, Penfolds, Treasury Americas and DAOU to create a multi- brand global luxury wine business of scale,” Ford said.
DAOU founders Georges and Daniel Daou said international markets had been DAOU’s “last frontier”.
“As part of the Treasury Wine Estates portfolio, we have unlocked the potential to be amongst the highest-end wines for consumers to enjoy globally. In Treasury Wine Estates, we have found a partner that not only understands the value of our brand and the premium assets we have cultivated but also the importance of ensuring that we maintain a relentless focus on quality and craftsmanship as we step into our future.”
In October 2022, TWE acquired Château Lanessan in Bordeaux, to grow its multi-regional luxury wine portfolio and double its existing production in France.
In November 2021, it acquired Frank Family Vineyards for $434 million to build its luxury chardonnay market and become the third biggest player in the US.
Completion is expected by the end of CY23, subject to US anti-trust approval.
