Shares of Treasury Wine Estates fell more than 11% on Friday after the top Australian winemaker undertook a round of discounted capital raising to fund its $900 million (€846.4 million) acquisition of California's DAOU Vineyards.
The company raised A$604 million (€366.1 million) at an offer price of A$10.80 per share, representing a discount of 9.8% to the stock's last close on Monday.
Treasury Wine shares retreated as much as 11.2% to A$10.75 by 00:27 GMT, posting their biggest intraday percentage decline since February 2021. The stock also hit its lowest level in three months.
The world's biggest standalone winemaker on Tuesday agreed to a $900 million buyout of US rival DAOU Vineyards, increasing its exposure to a market that it has long struggled to dominate amid uncertainty about stalled exports to China.
Luxury Offering
With the acquisition, Treasury Wine, the owner of luxury Penfolds and Wolf Blass labels, expects to fill a gap in its luxury offering, defined as bottles retailing for $20 to $40.
The company's combined premium and luxury portfolios delivered double-digit gross profit growth in fiscal 2023, according to its annual report.
The deal is expected to near full completion by the end of 2023 and contribute earnings before interest and taxes between $23 million (€21.7 million) and $25 million (€23.6 million) in the second half of 2024.
Analysts at UBS project the deal to provide scale for future standalone Americas Luxury division with a potential global Premium Brands division.
"TWE becomes market leader in the US luxury wine market with 11.1% share (was 5.5%), the world's largest & fastest growing luxury wine market," they added.
