US private equity firms KKR and Rhône Capital have increased their joint takeover offer for Penfolds owner Treasury Wine Estates (TWE) to $5.20 per share.

Treasury – which also owns the Lindeman’s, Wolf Blass and Rosemount brands, and the Beringer and Chateau St Jean labels in the US – rejected a $4.70 offer from KKR in April.

The winemaker’s board said at the time the $3.05 billion offer undervalued the company.

But Treasury says it is now in negotiations with KKR and Rhône to allow them to carry out due diligence on the company’s books.

“The board of TWE, together with its advisers, has concluded, based on the revised proposal, that it is in the interests of its shareholders to engage further with KKR and Rhône,” TWE said in a statement today.

The $5.20-per-share offer is above the $4.95 per share Treasury was trading at on Friday and more than 40 per cent above its $3.69 share price in April, prior to the initial takeover bid being announced.

The new offer values the company at $3.38 billion.

The proposal remains subject to several conditions, including final approval of KKR’s and Rhône’s investment committees, availability of financing and unanimous recommendation by the board of TWE for the transaction.

KKR and Rhône have stated that the payment of any dividends or capital returns prior to completion of any transaction will affect their valuation of the company and, accordingly, would need to be deducted from the price proposed.

The board of TWE said there was no certainty that the proposed transaction would result in an offer for the company.

“If an offer does result, the board will assess whether it delivers a value proposition that is superior to the expected benefits from management’s renewed strategic plans to:

• Increase and accelerate consumer marketing investment in the company’s brands;
  Continue to drive efficiencies and improve the company’s cost base; and
  Address structural opportunities in the company by focusing on commercial brands separately from the Luxury & Masstige portfolio in Australia.

The statement said shareholders do not need to take any action in response to the revised KKR and Rhône proposal.

Shares in Treasury Wine Estates jumped more than four per cent in early trade this morning.

Treasury shares were trading at $5.16 per share at 1105 AEST, up from $4.95 on Friday, after emerging from a trading halt pending the takeover bid announcement.