After harvesting net proceeds of $300 million from divesting non-priority US portfolio brands and assets, Treasury Wine Estates (ASX: TWE) is grafting its gains onto the luxury market through a deal to buy Frank Family Vineyards (FFV) for US$315 million ($433 million).
Treasury Wine's leadership believes the Napa Valley, California-based business will be highly complementary to its Americas business by filling a key portfolio gap for luxury chardonnay.
FFV has a long-term track record of delivering strong revenue and EBITS growth in addition to margins in the range of 35 to 40 per cent.
The transaction is due for completion next month, with the Californian winery's founders Rich and Leslie Frank committed to "genuine ongoing involvement in the Treasury Americas business".
Treasury Wine Estates chief executive officer Tim Ford says the deal represents a rare opportunity to acquire a luxury brand and portfolio of wines with which consumers enjoy and connect.
"The acquisition of Frank Family Vineyards represents an outstanding complementary addition to the Treasury Americas brand portfolio and is another important step towards our ambition of becoming the premium wine market leader in the Americas," says Ford.
"This business has a proud and consistent history and proven track record of success, having been expertly built and led by Leslie and Rich.
"Together with them, we are excited by the future potential that will be unlocked by the strengths of the Treasury Americas luxury wine platforms."
Ford says his company is also looking forward to welcoming the broader Frank Family Vineyards team to the group, including their significant expertise and experience.
"This is a compelling strategic and financial investment, comfortably meeting our investment criteria and one we expect will deliver attractive growth and financial returns for TWE’s shareholders over the long-term," he says.
Rich Frank says he and Leslie, along with their team, are excited to remain actively involved with FFV while also taking on new leadership roles with Treasury Americas.
"Leslie and I look forward to continuing to be a part of the next chapter of Frank Family Vineyards, a business we have spent nearly three decades cultivating into a beloved luxury wine brand," he says.
"We have prided ourselves on creating a family atmosphere among our staff and our guests and know this legacy will carry on."
The purchase will be funded by a mix of cash proceeds from US divestments - a program that has now been "substantially completed" - and debt, with a new US$240 million ($330 million) underwritten acquisition bridge facility.
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