Is one of Australia’s largest wine groups likely to be acquired by their French counterparts?
According to the daily mail on March 7, French spirits and wine giant Pernod Ricard is rumored to be considering buying treasure wine estates, which owns Penfolds and other brands, for 5 billion pounds (about 45.056 billion yuan).
“The company does not comment on any speculation,” the company said in a reply today
Meanwhile, the Australian financial review reported today that the shares of ASX: twe rose nearly 10% on Monday, stimulated by the acquisition rumors. At the same time, the report pointed out that due to the serious decline of its lucrative business in China, it is extremely difficult to value the parent company of Benfu.
Let’s take a look.
According to a number of sources quoted by British media, France’s largest wine company is interested in acquiring part or all of Fuyi’s equity. Fuyi has received an offer of a $15.67 per share, but it is not sure whether the offer is from polyrexa or a US private equity company, the source said.
In addition, the report quoted another source as saying that it had heard that polyrexa might buy 30% of the shares, but Fuyi might have refused.
Xiaoshidai noticed that the Australian media added today that a few weeks ago, there were rumors that the price of potential private equity fund acquisition plan could be as high as a $16 per share.
According to the data, polyrexa ranks second in the global liquor and wine industry. In 1975, it was merged by Pernod and Ricard, with a combined sales volume of 8.448 billion euros in fiscal year 2020. Its brands include zunmeichun (Irish whisky), absolute vodka (vodka), Martell (cognac), etc Jekas, borange, empire garden and golden dance (wine), etc.
Although it’s not clear whether polyrexa intends to take Benfu into its pocket, it’s actually quite active in acquisition activities at the moment. For example, xiaoshidai noted that recently, polyrexa announced that it has signed an agreement to acquire a majority stake in La hechicera, a super high-end Colombian rum, which is expected to be completed in the next few weeks.
Fuyi wine group is one of the largest wine groups in Australia. Its predecessor belongs to Foster’s, a global wine giant. In May 2011, it became independent and listed in Australia. In the Chinese market, the most familiar wine brands are Benfu and fenfu.
Today, pan Jiajia, President of Muchen college and MBA guest tutor of wine and spirits management of Burgundy business school, introduced to xiaoshidai that Benfu has always been the representative of Australia’s high-end wine. Although the prices of its bin389, bin407 and bin707 series products have been rising year after year in China, “the market demand is still large”; Fanfu focuses on hotels and catering channels, belonging to the middle and low level End products.
According to the data obtained by xiaoshidai from tmall global today, in 2020, the top five brands of wine imported by the platform are Penfolds, Lafite, vino75, j.p.chenet and aizhiwan; the top five countries of wine imported by the platform are Australia, France, Italy, Chile and Spain.
“It is very clear that Ben Fu’s largest market in the world is Chinese mainland.” Pan Jiajia told xiaoshidai that at present, due to the sluggish relationship between the two sides and the impact of tariff policy, Benfu’s prospects in China are being tested.
Frustration in China
Penfolds is an epitome of Australian wine exports to China.
According to the 2021 fiscal year interim results released by Fu Yi in February 17th, it was the first time that it has separately disclosed its business from Chinese mainland. In the six months to December 31, 2020, profits from its China operations fell 37% year-on-year to a $78.8 million, according to the results.
Since the end of last year, Australian wine producers have been subject to tariffs of up to 212% on their exports, compared with 169% on Fuyi. Reuters reported in February that the Chinese market accounted for about one-third of the company’s profits before China implemented anti-dumping and other measures.
In August last year, the Ministry of Commerce announced the initiation of an anti-dumping investigation on imported wine from Australia. In addition, the Ministry of Commerce announced the imposition of a temporary anti-dumping deposit of 6.3% – 6.4% on imported wine from Australia before the final result of the anti subsidy investigation on Australian wine was determined on December 11.
In February, the financial network reported that Andreas Clark, the chief executive of the Australian wine authority, said that the export of Australian wine to Chinese mainland declined immediately after the promulgation of a temporary tariff policy in November. The sharp decline in exports and exports in the last two months of the year led to a 14% decline in Australian wine exports to the Chinese mainland in the 2020 year to 1 billion 10 million Australian dollars, and exports decreased by 29% to 96 million liters.
According to the latest export report issued by the Australian wine authority, in the 12 months to December 2020, Australian wine exports decreased by 1% to a $2.89 billion due to tariff policy. The Australian wine authority said it expects Australian wine exports to China to remain sluggish in the next few months and affect the overall export data in 2021.
In addition, the information of food and cosmetics not allowed to enter the country in January 2021 released by the General Administration of Customs showed that due to unqualified labels, more than 23000 liters of wine imported from Australia were not allowed to enter the territory, involving the well-known Penfolds brand wine.
Under tight trade relations, the Australian wine giant is busy in the Chinese market with staff optimization, restructuring and new product development – it has made it clear that it does not intend to give up this huge potential consumer market.
Xiaoshidai noticed that on February 26 this year, Australian financial review reported that Fuyi had optimized 60 posts in China after imposing heavy taxes on wine. It is reported that 50 to 60 people were affected in the internal announced restructuring, most of them concentrated in the sales and marketing fields.
(Fuyi’s strategy to deal with the business challenges in China)
Tim Ford, Fuyi’s CEO who took office in July last year, had previously said that the restructuring of China’s business was in response to temporary tariffs imposed by the Chinese government, the report said. “The temporary tariff measures for Australian wine are still in progress, which makes Fuyi need to adjust our business model in China.” He said.
“Unfortunately, this means that our local team in China will change. Our focus is to support the affected team members and continue to provide them with the greatest care and respect in the meantime. ” He said.
Ford pointed out earlier that the company has not given up its business in the Chinese market and will stick to it because there is still demand for its flagship product Benfu.
When announcing the mid-term results of fiscal year 2021 in February, Ford said that the group expected to make a “modest” profit from China in the first half of 2021, but would not give up the Chinese market, and was starting preliminary work to launch a series of local versions of Penfolds made from Chinese grapes.
“It’s definitely a long-term ambition for us to have Penfolds wine from China.” He said.
Ford also said the company would eliminate most of its regional divisions from July 1 and instead divide them by brand. Under the new operation mode, Benfu will be split into an independent department within the company. The three new divisions in Fuyi are Benfu, Fuyi high-end brands and Fuyi America.
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