Treasury Wine considers demerger of Penfolds

Treasury Wine Estates (TWE) is considering a demerger and spin-off of the Penfolds brand, which would see the brand listed as a separate business on the ASX by the end of 2021.

The Australian wine company said the thinking behind the demerger is based on a focus on premiumisation and accelerating the separate focus of its luxury and commercial portfolios.

Following a potential demerger, shareholders would own a share in Penfolds and in New TWE proportional to their existing holdings.

“Penfolds accounts for approximately 10 per cent 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,” TWE chief executive Michael Clarke said in a statement to the ASX on Wednesday.

“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.”

TWE said the decision to proceed with a demerger hinges on a cost-benefit evaluation regarding shareholders, along with regulatory approvals and is subject to the stabilisation of market volatility and the global COVID-19 pandemic.

In January the company announced a 17 per cent drop in earnings from its US business to $98.3 million, resulting in the company revising earnings growth guidance from 15 per cent to 20 per cent down to 5.0 per cent to 10 per cent for the full financial year. 

Last week, the company confirmed it was being sued by shareholders who bought shares before it revised its guidance in January.

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