Why is the Treasury Wine share price sinking 6% today?

This wine giant's shares are under pressure today. But why?

| More on:
CA woman sits on her bed wailing and crying with a wine bottle in one hand and a glass in the other.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Treasury Wine Estates Ltd (ASX: TWE) share price has returned from its trading halt.

In morning trade, the wine giant's shares are down 6.5% to $11.29.

What's going on with the Treasury Wine share price?

The weakness in the Treasury Wine share price today has been caused by the company completing the institutional component of its $825 million equity raising.

These funds are being raised to support the acquisition of California-based luxury wine company DAOU Vineyards for US$900 million upfront and up to US$100 million in earnouts.

According to the release, the institutional component of the entitlement offer raised gross proceeds of approximately $604 million at a 10.7% discount of $10.80 per new share.

It was well supported by institutional shareholders, with approximately 78% of entitlements available to eligible institutional shareholders taken up. Take-up across Asia Pacific-based institutional shareholders was approximately 96%.

Entitlements that were not taken up by eligible institutional shareholders and entitlements of ineligible institutional shareholders were sold and cleared in the institutional shortfall bookbuild at a 6.5% premium of $11.50 per new share.

Treasury Wine's CEO, Tim Ford, commented:

We are very pleased with, and appreciative of, the level of institutional shareholder support we have received for both the equity raising and the Acquisition of DAOU Vineyards. We look forward to completing the retail component of the entitlement offer. We are excited to complete the Acquisition and to bring the combined business to life in 2024. The Acquisition reflects the continuation and acceleration of our luxury-led portfolio premiumisation strategy.

The company will now push on with its retail entitlement offer, which is expected to raise approximately $221 million at the same price.


The overall reaction to the deal has been positive, with analysts overwhelmingly supportive of the transaction.

Goldman Sachs expects the deal to give Treasury Wine's bottom line a big boost. It said:

Converting to AUD, we calculate the pro-forma NPAT uplift to be in the range of 17-20% for FY25 vs our latest published NPAT.

Over at Citi, its analysts believe the deal could provide extra growth opportunities and lift its margins. It said:

We believe the proposed DAOU acquisition could provide Treasury with a new growth avenue and is consistent with its premiumisation strategy, noting Treasury upgraded its Americas EBIT margin ambition to high 20%s, up from 25%.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor James Mickleboro has positions in Treasury Wine Estates. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended Treasury Wine Estates. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Consumer Staples & Discretionary Shares

Cheerful Father And Son Competing In Video Games At Home
Share Market News

Here's how the ASX 200 market sectors stacked up last week

ASX consumer discretionary shares rose by more than 3% last week.

Read more »

A mature aged man with grey hair and glasses holds a fan of Australian hundred dollar bills up against his mouth and looks skywards with his eyes as though he is thinking what he might do with the cash.
Consumer Staples & Discretionary Shares

Is now the time to buy this high-yielding ASX dividend stock?

This stock could be ripe for an investment.

Read more »

A couple in a supermarket laugh as they discuss which fruits and vegetables to buy
Broker Notes

Why Goldman Sachs just upgraded Coles shares

The broker has become a lot more positive on this supermarket giant.

Read more »

A customer and shopper at the checkout of a supermarket.
Consumer Staples & Discretionary Shares

Why this could be the best ASX 200 consumer staples stock to buy in May

Here's why I think this stock is a great buying opportunity in May.

Read more »

A woman has a big smile on her face as she drives her 4WD along the beach.
Share Gainers

Why this $1.5 billion ASX 200 stock just surged 10%

ASX 200 investors are sending the stock surging on Tuesday. But why?

Read more »

A group of young ASX investors sitting around a laptop with an older lady standing behind them explaining how investing works.
Consumer Staples & Discretionary Shares

Top fundie says this heavily shorted ASX 200 stock is 'cheaper than it's worth'

Learn here about an ASX 200 stock this Airlie fund manager likes.

Read more »

A laughing woman pushes her friend, who has her arms outstretched, in a supermarket trolley.
Broker Notes

Coles share price holds firm while Woolworths tumbles 18% in 2024. Time to buy?

We canvas the views of a few top brokers on whether Coles shares are a good buy today.

Read more »

Coles Woolworths supermarket warA man and a woman line up to race through a supermaket, indicating rivalry between the mangorsupermarket shares

Which of these ASX 200 shares is the better bargain in May?

Here's my take on Coles vs. Woolies...

Read more »