The Treasury Wine Estates Ltd (ASX:TWE) share price rocketed over 8% higher today before slightly retreating to be up 7.3%. The mouth-watering leap appears to be on the news of a potential takeover bid.
Earlier today, shares in the alcoholic beverage producer were trading as high as $11.15. The share price is currently sitting at $11.06. Yesterday, it closed at $10.31. In comparison, the S&P/ASX 200 Index (ASX: XJO) is up only 1%.
According to a report in British publication This is Money (TIM), French drinks giant Pernod Ricard SA (EPA: RI) is champing at the bit to buy Treasury Wine. TIM is reporting the offer could see Treasury Wine valued at over GBP 5 billion (approximately $9 billion). The article does not specify if Pernod Ricard is looking to buy a controlling stake in the wine company or not.
The article claims an unknown bidder (possibly Pernod Ricard) has already made an offer of $15.67 per share.
Motley Fool Australia asked Treasury Wine Estates and Pernod Ricard for comment. Neither company responded by publication.
The Penfold’s distributor, in its FY21 half-yearly update, reported a net profit after tax of $175.3 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) was $284.1 million, and earnings per share (EPS) came in at 24.3 cents. All were down on the prior corresponding period.
Pernod Ricard, owner of brands such as Jacob’s Creek and Chivas Regal, is valued at 41.5 billion euros (approximately $64.2 billion).
What else could be driving the Treasury Wines share price?
Any other potential influences on the Treasury Wine share price would most likely be dragging it down.
The Chinese governments tariffs on Australian wine have decimated the industry. The People’s Republic claims the tariffs are an “anti-dumping measure”. However, many believe the protectionist policy was implemented as retaliation for Australia’s calls for an enquiry into the origins of COVID-19.
While exports to Europe and the US are surging in the meantime, it does not make up for the lucrative Chinese market.
As well, according to the Department of Agriculture, Water and the Environment (ABARES) the wine grape price and the wine export value are forecasted to decline over FY21 and into FY22. ABARES believes the price of grapes will fall from $694 per tonne to $540 per tonne.
Treasury Wine share price snapshot
Today’s gains for Treasury Wine are not out of the ordinary. The wine exporter’s share price is sitting 10.5% higher than this time last year. The company did, however, slip from its 52-week high of $13.12 back in August. Shares reached their lowest point of $7.87 in November, when China first placed tariffs on Australian wine.
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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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