Treasury Wine Estates, an Australia-based producer, has announced its plans to acquire California-based DAOU Vineyards for up to $1 billion. This acquisition will provide Treasury with the necessary scale to establish a standalone Americas luxury division.
Expanding Presence in the US Market
As part of the deal, Treasury will pay $900 million upfront for DAOU Vineyards, which the company identifies as the fastest-growing luxury wine brand in the US. Additionally, there is a possibility of paying up to $100 million in earn-outs linked to growth targets over the next three years.
Driving the Premiumization Strategy
With this acquisition, Treasury aims to further its premiumization strategy, which entails an increased focus on higher-margin premium wines. This strategic move is aligned with changing consumer trends and the need to differentiate itself in a crowded lower-end market.
Financing the Acquisition
To fund this acquisition, Treasury plans to undertake a fully underwritten entitlement offer of 825 million Australian dollars ($525.9 million) and a share placement worth A$157 million. The remaining funds required will be obtained through a new $350 million debt facility.