Treasury Wine Estates Ltd (ASX: TWE) shares soared nearly 10% on open this morning after an article released by a UK newspaper indicated that a French winemaker may be interested in the business.
It’s been a volatile ride for the company’s shareholders over the past year, with complications arising from COVID-19 as well as tariffs imposed by China. Its shares are still trading 37% lower than their pre-COVID levels.
TWE potential buyout
A recent article published by UK-based This is Money, indicated that the company had been approached by French drink maker Pernod Ricard regarding an offer for either some or all of the Australian business which could be worth over £5 billion.
Sources speculated that Treasury Wine Estates had received an offer of A$15.67 per share, but it’s unclear whether this came from Pernod Ricard or a separate US-based private-equity firm.
No official announcements have been made by Treasury and it’s declined to comment on the rumours.
Time to buy TWE shares?
Treasury has been hit by multiple complications over the last 12 months. With the share price still looking fairly beat-up, it might be good value at these levels if trading conditions become more favourable in 2021 and beyond.
Just before the onset of COVID-19, Treasury announced its US segment was underperforming partly due to higher discounting required to maintain share across all price points.
Shortly after, COVID-19 resulted in the closure of restaurants and other key channels for higher-margin luxury wine, which led to decreased profitability in FY20.
If all of this wasn’t enough, then came along a 169% tariff imposed by Chinese authorities on Treasury’s products.
The current situation doesn’t look fantastic by any means, but like many other ASX-listed shares that have been heavily impacted by COVID-19, complications may turn out to be temporary, so it might be a good opportunity to pick up some shares today at discounted levels.
In response to the underperformance in the US, the company is currently undergoing a restructure of the business that will apparently save the company around $35 million per year. Additionally, it’s commenced a global supply chain restructure which will ideally save the company around $50 million in cost of goods sold (COGS) by FY23.
Treasury might be a worthy candidate for a bottom drawer investment, but there are probably other ASX growth shares that might perform better in the meantime. For more ideas, click here to read: 2 ASX tech shares I’m watching in March.
