MELBOURNE, Nov 18 (Reuters Breakingviews) – Treasury Wine Estates (TWE.AX) is slowly emerging from its hangover. The A$8.3 billion ($6 billion) vintner’s value almost halved last year thanks to Chinese tariffs and an oversupply of cheap Californian plonk. It revived somewhat by selling some underperforming U.S. assets while proving more resilient than expected in dealing with Beijing’s sky-high levies . Now Chief Executive Tim Ford’s $315 million deal for Napa-based Frank Family Vineyards should help see off some more recent wobbles.
The acquisition of the Chardonnay maker pours out an inoffensive 6.5% return on investment for Treasury Wine, based on this year’s earnings. It should taste better after being left to breathe: Frank’s top line has been growing at a compound rate of 9% in recent years, and its 35%-40% operating margin is more than double Treasury’s. The buyer’s more extensive distribution network could get sales chugging faster, too. It could be a vintage deal. (By Antony Currie)
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($1 = 1.3770 Australian dollars)
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