SA wine merger withers on the vine

A proposed merger between the owners of some of South Australia’s top wine brands will not proceed.

May 28, 2024, updated May 28, 2024
Accolade Wines owns SA brands including Hardy's, Petaluma, Banrock Station and St Hallett's. Photo: Hardy's.

Accolade Wines owns SA brands including Hardy's, Petaluma, Banrock Station and St Hallett's. Photo: Hardy's.

The owner of SA wine brands including Hardy’s and Petaluma has walked away from merger discussions with the parent company of Nepenthe and Barossa Valley Wine Company.

Adelaide-based Australian Vintage and Australia’s second-largest wine business Accolade announced in February that the two companies were in “very early stage” discussions about a potential merger.

However, that deal looks to be terminated, with Australian Vintage yesterday notifying shareholders that Accolade said on May 22 that it was “not in a position to continue discussions further at this time” about the merger.

Cowandilla-based Australian Vintage said the two parties had undertaken preliminary two-way due diligence for the deal “which was largely completed by mid-April 2024”.

“Since the completion of the initial due diligence period, both AVG and Accolade had been engaged with respect to commercial terms and process for more detailed and substantive diligence,” Australian Vintage said.

Australian Vintage said Accolade would not provide any further detail, but noted the deterioration of merger talks followed Accolade’s offer to Riverland wine growers being rejected last week.

In April, Accolade offered to buy out a portion of CCW contracts at $4000 per hectare for growers looking to exit the market, which was suggested as a solution to the red wine glut impacting growers in SA.

The offer also included Accolade buying out CCW’s “direct contract” bulk wine deal for export, which the group said was worth $11 per tonne.

But CCW members voted overwhelmingly against the offer, which “disappointed” Accolade directors.

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“The package was the only measure put forward to date, by any party nationally, to support a difficult, but much-needed industry transition to a more sustainable footing,” the board said.

“It was also the only initiative that gave all parties some control over this process, through key terms including price, tenure, varietal mix and an optional exit package.”

It also comes nearly four months after Accolade accepted an offer from a consortium of investment firms called Australian Wine Holdco Limited (AWL) to take full equity ownership of the company as part of a recapitalisation plan that would reduce the company’s interest-bearing debt.

AWL comprises funds backed by existing Accolade financial partners Bain Capital Special Situations, Intermediate Capital Group, Capital Four, Sona Asset Management and Samuel Terry Asset Management.

The deal by AWL is now complete. Accolade would not provide InDaily any statement in response to Australian Vintage’s update to shareholders.

The collapse of the Accolade and Australian Vintage tie-up was announced as part of a request for a suspension of trading by the latter, which is gearing up to announce a capital raise and debt refinancing plan.

Australian Vintage said it was “not in a position to make the announcement” yet, and therefore requested its shares be suspended from trading on the stock market. This follows a trading halt entered into by the listed company on Thursday last week.

The company will remain suspended from trading until it updates the market, which is expected to be on or around 11 June 2024.

However, the company did note that it expects its net debt at 30 June 2024 to blow out from $43-50 million as previously announced to now $70-75 million.

“In addition, $15 million of existing bank capacity is due to expire at the end of July 2024, reducing Australian Vintage’s bank capacity, including overdraft facilities, to approximately $78 million,” Australian Vintage said.

“Given expected working capital requirements in Q1 FY25, Australian Vintage believes that commencing trading would be materially prejudicial to its ability to source additional capital which is critical to support its continued financial viability and operations.”

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