Is now the time to sample a drop of Treasury Wine Estates Ltd?

Are the stars aligning for long-suffering Treasury Wine shareholders?

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Treasury Wine Estates Ltd (ASX: TWE) has seen its share price rise in mid-morning trading, despite announcing that it would write off $260 million in non-cash impairments this financial year.

Perhaps a news report by the Australian Financial Review (AFR) suggesting that global suitors are ’emerging out of the woodwork’ for the company, and potentially starting a bidding war. The AFR reports that luxury goods brand, LVMH, is considering whether to make a full takeover bid, or hive off the Penfolds brand as part of a consortium.

Chinese-owned food group, Bright Food, is also rumoured to be circling the ailing owner of some of Australia’s most iconic brands. And the AFR notes that the world’s largest wine seller, Constellation Brands is also crunching the numbers. Private equity group KKR offered $4.70 per share for Treasury Wines, valuing the business at around $3.1 billion, but was rebuffed by the board as being too cheap.

Any bid in the near future would likely have to be much higher, given Treasury shares are trading at $4.87 currently – but a takeover premium may already be included in the price.

Should a takeover bid not eventuate, Treasury’s management are implementing four strategies to improve the company’s performance, including increased marketing and ad spend, reducing overhead expenses and fixing the structural issues faced by some parts of the business.

One of those issues is likely trying to find a way to raise the company’s margins on wine sold in Australia. With Woolworths Limited (ASX: WOW) and Coles – owned by Wesfarmers Ltd (ASX: WES) controlling an estimated 77% of retail wine sales, Treasury has a tough job ahead.

With brands including Penfolds, Lindeman’s, Wolf Blass, Fifth Leg and Yellowglen in Australia and Beringer, St. Clement and Chateau St. Jean in the Americas; potential buyers emerging and a turnaround strategy in place Treasury Wine could be a tasty purchase. For an even better buy, you might want to read on further…

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Motley Fool writer/analyst Mike King owns shares in Woolworths. You can follow Mike on Twitter @TMFKinga

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