News comment

Pernod Ricard ‘in talks’ with Accolade to sell Australian wine division

13 May 2024 By Ron Emler

The cauldron that is Australia’s wine sector has been given a vigorous stir by the country’s leading financial publication.

The Australian Financial Review has reported that Pernod Ricard is in talks to sell its wine interests in the country to Accolade for AU$500 million (£265m).

Accolade, the country’s second largest producer which owns Hardys and Petaluma, was recently rescued from under a mountain of debt by Australian Wine Holdco Limited (AWL), a London-based venture capital consortium led by the Bain group.

Australian Vintage (AV), the country’s third largest producer, which earlier this month summarily fired its chief executive Craig Garvin, had previously acknowledged that it was in talks about a merger with Accolade. Those talks have been ongoing for about three months.

Bearing fruit

Its restructuring plan, AV had assured investors in February, was bearing fruit and it could continue as a stand-alone entity if the talks came to nothing.

It now appears that AWL is playing hardball by discussing alternative plans with both Australian Vintage and Pernod Ricard.

Last week Simon Mawhinney, managing director of Allan Gray, which holds a 17% stake in Australian Vintage and is the biggest shareholder in the McGuigan producer, complained that the way in which it had fired Garvin for “lack of judgment” had given Accolade the upper hand in the talks.

I do think this is the kind of thing to embolden Accolade to get a better deal than might otherwise have been the case,” Mawhinney said.

Sources to the negotiations said that one scheme under discussion was for AWL to “reverse” its business into Australian Vintage to keep the latter’s quotation on the Sydney stock market.

Carlyle

Accolade had been bought in 2018 by American investment house Carlyle for $AU1 billion, but its debt-laden plan to expand the business was shipwrecked by the perfect storm of coronavirus and China’s punitive tariffs.

Previously it had been speculated that Pernod Ricard was looking to dispose of its wine business in Australia because of the low return on capital invested it generated.

In its latest quarterly figures, the French group reported wine sales falling by between 9% and 10% compared with last year, mainly driven by declines in USA and UK.

Overall, wine sales, including those sourced from Australia as well New Zealand, Spain and South America comprise just 4% of its turnover.

It was even said that Pernod Ricard’s chairman and chief executive, Alexandre Ricard, had wanted to conclude a sale by the end of March.

Portfolio

The French giant called those rumours speculation and said that it continually evaluated its entire portfolio along with all aspects of its business in the interests of shareholders.

It declined to comment yesterday on the Australian Financial Review’s report.

Accolade has not responded to a Drinks Business request for a comment but Australian Vintage said: “As announced to the ASX [Australian Stock Exchange] on 26 February 2024, AVG confirms it is in exploratory discussions with Accolade, however these discussions are still at a very early stage, and there is no certainty that any transaction will eventuate. AVG will continue to update the market in accordance with its continuous disclosure obligations.”

What any disposal by Pernod Ricard could mean for the Jacob’s Creek range of wines, which are solely produced in Australia and are best-sellers in Britain, is unclear.

Australia’s industry is in turmoil with vast overhangs of unsold wine, vineyard owners facing bankruptcy and producers seeking to renegotiate grape contracts.

Accolade itself has sought to alter its business by offering a new contract to 530 members of the CCW co-operative of growers in the Riverland area of South Australia.

It would buy-out CCW red wine contracts for AU$4,000 per hectare for those grape growers who are looking to leave the sector but then only take around 80% of the current annual volume, or around 150,000 tonnes of grapes from the co-op.

The growers will vote on the proposal later this month.

TWE

Meanwhile, Australia’s biggest producer, Treasury Wine Estates, has undertaken its own restructuring, closing some wineries and warning growers of reduced demand for their grapes in future vintages despite the return of the China export market.

It has also been speculated that Treasury could split its businesses by hiving off the luxury Penfolds division into a separate company.

Its commodity wines would be put under a separate banner that could eventually be sold off or listed on the stock market as a new company.

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