A deal is shaping up between Australian giants Southcorp and Rosemount Estates that would merge the two wine companies and put the Rosemount management team in charge, according to inside sources. On Wednesday (Tuesday in the United States), Southcorp officially informed the Australian stock exchange that it is discussing a merger with Rosemount. A deal is expected before the end of the month.
The merged company would become the largest wine group in Australia with sales of about A$1.3 billion (US $681,000), more than BRL Hardy or Beringer Blass, the wine company formed by Foster's Brewing Group's $1.5 billion acquisition of California's Beringer Wine Estates last year.
The publicly held Southcorp has been rumored to be facing a possible takeover bid from British drinks giant Allied Domecq, which is currently seeking international acquisitions. (The company just recently lost out to Australian brewer Lion Nathan in an attempt to buy New Zealand's Montana Wines and is believed be looking at California's Kendall-Jackson Wine Estates.)
According to sources, Southcorp -- which is cash-rich after having recently sold its packaging division -- wants to get big enough to make it difficult, if not impossible, for Allied Domecq to take it over.
In addition, according to the Australian Financial Review, which first published the reports of merger discussions, Southcorp is expected to release its half-year report soon and is believed to be looking to boost its flat domestic wine sales. In the past two weeks, its share price has increased about 20 percent on rumors of a possible takeover or acquisition; later, its share price had lost about half that gain.
Rosemount, which is privately owned by the Oatley family, is estimated to be valued at A$1.5 billion (US$786 million). In 2000, the Hunter Valley-based winery produced 4.5 million cases from more than 5,000 acres of vineyards it owns in several Australian wine regions. It's currently the second best-selling Australian brand in the United States, according to Impact Databank. And last fall, Rosemount formed a joint venture with Robert Mondavi Winery of California to produce and market two new lines of California and Australian wines.
Rosemount at first declined to confirm or deny the reports of a merger. But corporate affairs manager Brian Carter said that the Oatley family sent a memo to all key employees saying that they "guarantee that Rosemount will not be swallowed up" and that "the Oatley family will maintain their leadership position in the Australian wine industry." On Wednesday, a second memo informed employees that the merger talks were indeed happening, and reaffirmed those statements.
According to sources, under the deal currently being discussed, Rosemount would be merged with Southcorp's wine division -- which includes Penfolds, Lindemanns, Seaview, Seppelt and Wynns Coonawarra, as well as two joint ventures: La Perouse, in France's Languedoc-Roussillon region, and Seven Peaks, in California's Central Coast. The CEO of Rosemount, Keith Lambert, would be in charge of the company.
Speculation in the Australian press centered around Southcorp trying to generate some good news before it announces its half-year earnings on Feb. 27. Analysts expect the company to fall short of revenue expectations. Southcorp's top management has undergone a shakeup in several key positions since Bruce Kemp retired as wine division chief in 1999 and American-born Tom Park replaced him.
Earlier this month, as planned, Park officially was promoted to managing director of the entire company, which includes both the wine division and a water heater division. Park replaced Graham Kraehe, who resigned Feb. 1 after completing the sale of the packaging company. Other sources reported on Tuesday that, as part of the Southcorp-Rosemount deal, members of the Oatley family would become directors of Southcorp.
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