Two major Australian wine producers, McGuigan Wines and Simeon Wines, have agreed to a merger that would create one of the country's largest wine companies, with six wineries, more than 9,500 acres of vineyards under its control and annual production equal to about 14.1 million cases. The deal is worth an estimated AU$400 million (roughly US$207 million).
The new company, which will be called McGuigan-Simeon Wines Limited, is already planning other acquisitions in South Australia. Brian McGuigan, managing director of his family business and now CEO of the merged entity, told Reuters that they are looking to buy properties in the Clare Valley, Coonawarra and perhaps McLaren Vale appellations.
Consolidation has been a driving force in the Australian wine industry, with the recent merger of Southcorp and Rosemount, Fosters' purchase of California's Beringer Wine Estates, and Lion Nathan's acquisitions of Petaluma and Banksia .
The two companies had already formed a strategic alliance in June 2001, and the merger further capitalizes on their strengths, combining Simeon's massive production capabilities with McGuigan's expertise in sales, marketing and brand-building, particularly overseas. Combined, the two will export to 20 countries, including key markets in North America and Europe.
"The merged company will be able to take advantage of growth opportunities in Australia and overseas faster than if the two companies remained separate," said Simeon managing director Neil MacKenzie, who becomes COO of the new company.
Brian McGuigan, who founded Wyndham Estate brand, which is now part of the Orlando Wyndham Group, launched McGuigan Wines with his wife, Fay, in 1992. The Hunter Valley-based company, which has extensive vineyard holdings in New South Wales and South Australia, produces sparkling, red and white wines in several price ranges. Annual sales total about 800,000 cases, with more than half of that going to export markets, such as the United States.
Though one of Australia's largest producers, making 125 million liters of wine a year, Simeon has a low public profile. Much of its business has been domestic bulk-wine sales, contract winemaking for other wineries and private labels for customers such as supermarket chains. But recently it has been concentrating on building its export business in Europe, with the United States as its next target. Simeon's main brand is Yaldara, from the Barossa Valley, which it bought in 1999.
The merger still has to be approved by Simeon's shareholders, and a vote is scheduled for May 2002. According to the proposal, each shareholder will receive 10 shares of McGuigan stock for every 16 Simeon shares. Trading on the two companies was suspended when the deal was announced Wednesday morning in Australia; the day before, McGuigan shares closed at AU$4.73 (US$2.45) and Simeon at AU$2.96 (US$1.04).