Australia's Treasury Wine Estates Ltd has announced it is to license A$100 million (€64.7 million) worth of its US brands to The Wine Group as part of an ongoing overhaul of its American operations.
Treasury, the world's largest listed winemaker, has been looking to shrink its low-end 'commercial' US portfolio after competitive pressure dragged on growth even before Chinese import tariffs and a pandemic-driven downturn in demand last year.
The Wine Group, the world's second largest wine producer, will source and sell Treasury's Beringer Main & Vine, Beringer Founders' Estate, Coastal Estates and Meridian brands.
Belinda Moore, senior analyst at stockbroking and research firm Morgans, said the deal was in line with TWE's strategy of focusing on premium brands in the United States.
"We expect that there are further transactions to follow given TWE's targets in the U.S." Moore said.
The four brands being licensed to The Wine Group, the owner of the Franzia, Glen Ellen and Cupcake brands, generated A$92 million of net sales revenue and accounted for A$13.5 million of gross profit in the six months to Dec. 31.
Treasury, which expects the agreement to generate proceeds of around A$100 million, said Beringer remains a core brand within its portfolio which it was not looking to dispose.
The U.S. deal comes amid speculation that Treasury has been approached for a takeover by French spirits maker Pernod Ricard or a U.S. private equity firm. Treasury's shares jumped on media reports about the potential deals earlier this week. The company declined to comment.
"Given the quality of the business, we think a number of luxury brand/alcohol/wine companies could be interested," Moore said, adding that any approach would be opportunistic given how the tariffs have hit Treasury's earnings and share price.