Treasury Wine Estates Ltd (ASX: TWE) shares are on the rise this morning after the company updated the market regarding a licensing agreement to progress its United States wine business. At the time of writing, the Treasury Wine share price is up 3.87% to $11.53.
Let's take a look at what the Aussie wine producer reported.
What did Treasury Wine announce?
The Treasury Wine share price is on the move today on the back of the company's latest positive announcement.
According to this morning's release, Treasury Wine has entered into a long-term licensing agreement with The Wine Group. This will see popular brands such as Beringer Main & Vine, Beringer Founders' Estate, Coastal Estates and the Meridian range sold in the Americas region.
In the six-month period ending 31 December 2020, these associated brands saw over 2.3 million cases sold. This contributed to Treasury Wine coffers with net sales revenue of $92 million and $13.5 million in gross profit.
Under the agreement, The Wine Group will obtain all remaining inventories within the portfolio on a gradual drawdown basis. In addition, future bulk wine supply contracts for these brands will be managed by The Wine Group.
Treasury Wine stated that the deal is in line with its plans to deliver a premium-focused business in the Americas. It expects to generate a one-off net cash inflow of around $300 million as part of its strategic plans.
Today's announced deal is anticipated to bump up Treasury Wine's bank balance with roughly $100 million in cash proceeds.
Management comments
Treasury Wine CEO Tim Ford commented on the partnership with The Wine Group, saying:
We are delighted to be entering into this long-term transaction with The Wine Group, which will be of mutual long-term benefit to our respective organisations. For TWE, this transaction is a significant milestone towards our plans to deliver the future state premium US wine business and we can now focus solely on continuing the growth of our premium brand portfolio to drive future performance in the Americas.
Treasury Wine share price review
The Treasury Wine share price has been on a rollercoaster ride over the past 12 months. Although the company's shares are up nearly 15% over the period, investors would be accustomed to its volatile swings.
In August, Treasury shares peaked at $13.12, only to drop to a low of $7.87 in November on the back of Chinese wine tariffs. While this represents a decline of 40%, the Treasury Wine share price has gradually picked up most of these losses since then.
