Treasury Wine Estates is considering a demerger and spin-off of its famed Penfolds brand by the end of 2021 as it accelerates the separate focus of its luxury and commercial portfolios.
The Melbourne-based company said the move would create a new ASX top 50-100 company for Penfolds and an ASX 100-150 company for New TWE.
Shareholders would then own a share in Penfolds and in New TWE proportional to their existing holdings.
TWE chief executive Michael Clarke said Penfolds accounted for about 10 per cent of the firm’s volume but well over half its earnings.
“A potential demerger would enhance New TWE’s and Penfolds’ ability to pursue their own strategic priorities and deliver a stronger long-term growth profile under separate teams and ownership structures,” he told the ASX.
However, TWE said the move remained subject to cost-benefit evaluation regarding shareholders, along with regulatory approvals.
The potential demerger would also be subject to the stabilisation of market volatility and the global COVID-19 pandemic but could otherwise be completed by the end of 2021, the company said.
TWE said in January that the drought, heat and fires in Australia would affect the cost of the local harvest, while the company also suffered a 17 per cent drop in earnings from its Americas region to $98.3 million.
This resulted in the company reconfiguring its earnings growth guidance from 15 per cent to 20 per cent down to 5.0 per cent to 10 per cent for the full financial year.
However, the winemaker’s net profit for the six months to December 31, 2019, was 5.1 per cent higher than the prior corresponding period at $229.2 million.
In January, it handed shareholders a 20 cent dividend, fully franked, which was 11 per cent more than at the same time last year.