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Australian Vintage (ASX: AVG) and its potential merger with Australia’s second-largest wine producer Accolade Wines have been thrown into turmoil following the shock sacking of CEO Craig Garvin.
In an announcement made well after the market closed on Friday, the McGuigan wine producer revealed it had terminated Garvin’s employment “for engaging in conduct that, in its view, displayed a lack of judgement and was inconsistent with the values of the company and the high standards expected of its chief executive officer”.
The termination was effective immediately following “careful consideration and discussion” between Garvin and the company’s board.
“While we are disappointed by the circumstances leading to his departure, we believe this decision is in the best interests of the company and its stakeholders,” says Richard Davis, the Australian Vintage chairman.
“The board remains committed to upholding the highest standards of conduct and accountability for all employees, including senior leadership.”
The company has not revealed the nature of the conduct behind the decision to oust Garvin, which is a blow to the company as he is understood to have been likely to have led the proposed merged entity with Accolade Wines.
However, Australian Vintage has assured shareholders that Garvin’s departure should have no impact on the company’s merger talks with Accolade Wines which it revealed in February.
“These discussions are continuing, although there remains no certainty that any transaction will eventuate,” says the company.
The merger proposal comes amid a massive ownership upheaval of Australia’s wine sector and challenging conditions for the industry.
Earlier this year, UK-based Carlyle Group sold Accolade Wines to Australian Wine Holdco Limited (AWL), a consortium of institutional investors, as part of a recapitalisation plan to ease the wine group’s debt burden.
A merger would see Australian Vintage brands McGuigan, Tempus Two and Nepenthe join forces with Accolade Wines’ Hardys, Petaluma, and Grant Burge labels.
Australian Vintage posted a net profit of $2.78 million in the first half of FY24, down from $12.9 million a year earlier. Although Garvin at the time said the result was in line with expectations, the result was impacted by weakness in its cask and private label business.
In an update last month, Australian Vintage reported a 15 per cent increase in grape volumes crushed from the 2024 vintage.
Australian Vintage has appointed non-executive director Peter Perrin as acting CEO while the company seeks a permanent replacement for Garvin.
The company says Perrin “brings a wealth of high-level wine industry experience” in Australia, the US and New Zealand over the past 40 years.
Despite the forced departure of Garvin, the Australian Vintage board has thanked the former CEO four his service and contributions to the company over the past four years.
“These include steering the company through the challenges of the COVID-19 pandemic and the development and execution of the company’s five-year strategic plan, which transformed AVG into a consumer-led branded business with a commitment to innovation,” says Davis.
Garvin, who held 1.2 million Australian Vintage shares and 1.29 million options at the end of June last year, received just under $1 million in remuneration in FY23.
Garvin’s accrued entitlements are to be paid and the former CEO will receive payment in lieu of his six-month notice, but the unvested performance rights he held as of last Friday will lapse. The 562,705 shares currently held in trust under escrow will be released and transferred to Garvin.
As acting CEO, Perrin is being paid a sixed remuneration of $734,886 per annum.
Investors took the news in their stride, with Australian Vintage shares trading unchanged with Friday’s close of 35.5c at 10.26am (AEST).
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