KKR and TPG Are Potentially Interested In Foster’s Wine Business

(Reuters) – Two of the world’s biggest private equity firms, Kohlberg Kravis Roberts & Co (KKR.N: Quote, Profile, Research, Stock Buzz) and TPG TPG.UL, are potentially interested in Foster’s (FGL.AX: Quote, Profile, Research, Stock Buzz) wine business, but they are not currently working on rival bids, sources told Reuters.

Foster’s, Australia’s largest brewer, this week rejected a private equity offer worth up to $2.5 billion for its underperforming wine business as too cheap, but did not identify the name of the bidder.

A source briefed on the situation said Cerberus Capital Management CBS.UL was the mystery firm that made the offer for the world’s second-largest wine business.

Foster’s wants to continue with plans to separate its beer and wine businesses, with top brands including Penfold’s, Beringer and Wolf Blass, after spending around A$7 billion buying wine assets at the top of the market.

Other private equity firms are also potentially interested in the wine unit, including KKR and TPG, industry sources familiar with the situation said.

The Financial Times said on Thursday that other private equity firms were working on potential bids, including KKR and TPG.

But one of the source told Reuters although buyout firms such as TPG and KKR were assessing the wine business, it was too early to say that bids were being prepared.

“Every private equity group is kicking the tires now,” the source said.

Spokesmen for KKR in New York and Melbourne declined to comment. TPG in Australia also declined to comment.

“I think most of the large private equity firms down here such as KKR, TPG and Carlyle CYL.UL would have looked at Foster’s wine business in the last few years,” said a banking source who declined to be named.

“I am not aware though of any firm currently looking, though these sponsors may now take another look,” he added.

Foster’s wine business, which has been overhauled and rebranded as Treasury Wine Estates, is seen as attractive to buyout firms because of depressed earnings at the weak point of the winemaking cycle, and strong brands.

Big private equity firms could also put together a consortium for such a bid, as happened with the bidding war for Australian hospital operator Healthscope this year, which at one stage involved five of the world’s biggest buyout firms in two consortia.

Private equity firms have some familiarity with alcoholic drinks businesses.

TPG could be interested in buying back some of the assets it previously owned — it held about 55 percent of Beringer with some partners when it sold to Foster’s in 2000.

And last year KKR bought the South Korean subsidiary of Oriental Brewery from Anheuser-Busch InBev (ABI.BR: Quote, Profile, Research, Stock Buzz).

Foster’s revelation on Wednesday that it had been approached for its ailing wine business took investors by surprise. Market attention all year has focused on potential buyers for the beer business, which enjoys some of the highest profit margins in the brewing world.

Foster’s shares were down 0.8 percent on Friday in heavy volume of three times an average day. They have surged 15 percent this year on takeover speculation, while the broader market is down 6 percent.

By Victoria Thieberger and Megan Davies
(Additional reporting by Sharon Klyne; editing by Balazs Koranyi)