Treasury Wine Estates Limited · ASX:TWE
Treasury Wine Estates — Merger or Acquisition (October 2023)
59 slides from Treasury Wine Estates's merger presentation, Oct 31, 2023
Slide 1: Acquisition of DAOU Vineyards and Equity Raising - Investor Presentation
31 October 2023 ASX ANNOUNCEMENT Acquisition of DAOU Vineyards and Equity Raising - Investor Presentation - NOT FOR DISTRIBUTION OR RELEASE INTO THE UNITED STATES Enclosed are the presentation materials for the investor and analyst webcast and conference call to be hosted by Treasury Wine Estates co
Slide 2: Acquisition of DAOU Vineyards and Equity Raising
Acquisition of DAOU Vineyards and Equity Raising 31 OCTOBER 2023 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 3: Important notices and disclaimer
Important notices and disclaimer This investor presentation (Presentation) is dated 31 October 2023 and has been prepared by Treasury Wine Estates Limited (ACN 004 373 862) (TWE). By attending an investor presentation or briefing, or accepting, accessing or reviewing this Presentation, you acknowled
Slide 4: Important notices and disclaimer
Important notices and disclaimer The distribution of this Presentation in jurisdictions outside Australia may be restricted by law and you should observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. This Presentation do
Slide 5: Important notices and disclaimer
Important notices and disclaimer Future performance and forward-looking statements This Presentation contains certain "forward-looking statements". The words "expect", "anticipate", "estimate", "intend", "believe", "guidance", "should", "could", "may", "will", "predict", "plan" and other similar exp
Slide 6: Important notices and disclaimer
Important notices and disclaimer The Joint Lead Managers have not assumed an investor will use the information in this Presentation as part of their investment decision without making their own enquiries and obtaining independent advice. Unless expressly agreed in writing, none of TWE, the Joint Lea
Slide 7: Transaction highlights
Transaction highlights ● Treasury Wine Estates (“TWE”) to acquire DAOU, a leading US luxury wine brand of scale, for an upfront consideration of US$900m ● Accelerates TWE’s luxury-led portfolio premiumisation focus, with the luxury portfolio contributing approximately 50% of global Group NSR post ac
Slide 8: Transaction Overview
Transaction Overview NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 9: Transaction Overview
Transaction Overview ● TWE has entered into arrangements to acquire 100% of DAOU Vineyards, LLC and its associated entities (collectively “DAOU”) Transaction summary ● Upfront consideration of US$900m1, plus an additional earn-out of up to US$100m payable in the event that certain NSR targets delive
Slide 10: Luxury wine brand of scale accelerating premiumisation
Luxury wine brand of scale accelerating premiumisation ● Highly acclaimed luxury wine brand based in Paso Robles, California, founded in 2007 by Georges and Daniel Daou ● Leading US luxury brand of scale and the fastest growing luxury wine brand in US Trade over the past year 1 ● Strong and accretiv
Slide 11: DAOU Overview
DAOU Overview NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 12: The luxury wine opportunity
The luxury wine opportunity The US is the world’s largest luxury wine market (2022)1 Luxury wine consumption is growing strongly in the US1 Five-year US wine market evolution (2017-2022) 5yr CAGR Luxury +7.4% 1.5 4.0 1.4 2.7 1.3 Index: 2017=1.0 1.2 US$ bn 1.5 1.1 Premium +0.5% 1.0 0.7 1.0 Commercial
Slide 13: Overview of DAOU
Overview of DAOU A highly acclaimed and fast-growing luxury wine business of significant scale • A highly acclaimed luxury wine business of scale founded in 2007 by NSR by price point (CY23e)2 brothers Georges and Daniel Daou 4% 13% • Based in Paso Robles, California, with strong presence in the hig
Slide 14: An outstanding luxury business
An outstanding luxury business Every attribute of DAOU reflects absolute quality Highly rated portfolio that sits Engaged with the next High-quality asset base with World-class organisation credibly alongside the best generation of luxury deep Paso Robles roots and culture of excellence wine consume
Slide 15: The DAOU luxury portfolio
The DAOU luxury portfolio Comprising five unique tiers, with strong growth trends across all price points Journey Superior quality at an Dedicated to producing the worlds best red Soul of the Lion, the Setting the benchmark for approachable price blends, distinctively in the Paso Robles style portfo
Slide 16: Highly acclaimed and admired
Highly acclaimed and admired DAOU has a long and consistent track-record of producing highly-rated wines Product Robert Parker’s Annual Rating1 5Y avg. "Brothers Daniel and Georges Daou’s deeply flavored, expressive, polished Patrimony Caves de Lions 98 99 94-96 98-100 98 wines are consistently at t
Slide 17: Leading US luxury experiences
Leading US luxury experiences A relentless focus on the next generation of US luxury wine consumer DAOU Mountain Luxury events and partnerships DAOU+ • DAOU’s iconic brand home, rising from • Experiential luxury creating organic • Fully integrated platform combining e- the heart of the luxurious Ade
Slide 18: Unrivalled Paso Robles footprint
Unrivalled Paso Robles footprint DAOU has deep roots in Paso Robles, with a focus on the high-end Adelaida sub-district • Paso Robles is a world-class winemaking region in the central- Paso Robles luxury sales growing ahead of other regions2 coast of California 17% Three-year average growth rate • T
Slide 19: A world class organisation
A world class organisation DAOU’s high-calibre team and culture will be an asset to Treasury Americas • DAOU has a growth-minded culture of excellence, supported by an innovative spirit and a constant focus on challenging the status quo – traits that are closely aligned with the TWE DNA • Approximat
Slide 20: A strong track record of growth
A strong track record of growth DAOU is the fastest growing1, scaled luxury wine platform in the US Volume (000s 9Le) NSR (US$m) EBITS (US$m) 1,086 63 212 873 164 44 651 126 37 CY21A CY22A CY23e CY21A CY22A CY23e CY21A CY22A CY23e DAOU’s trajectory of growth across the CY21-23e period reflects: TWE
Slide 21: Strategic Rationale
Strategic Rationale NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 22: Strategic rationale
Strategic rationale The acquisition of DAOU is strategically compelling 1 Accelerates TWE’s focus on luxury-led portfolio premiumisation to approximately 50% global Group NSR, with immediate accretion to key operating metrics 2 Creates a leading and iconic US luxury wine business through the combina
Slide 23: Accelerates TWE's focus on luxury-led portfolio premiumisation
1 Accelerates TWE’s focus on luxury-led portfolio premiumisation Immediate accretion to key portfolio and operating metrics Evolution of Net Sales Revenue by segment Treasury Americas F20 F23 Pro forma1 F23 to Pro forma growth 6% 5% 24% Luxury NSR per case 31% +21% to A$181.4 38% Premium 42% Commerc
Slide 24: A leading and iconic US luxury wine business
2 A leading and iconic US luxury wine business Solidifying Treasury Americas position in the highly attractive US luxury wine market Share of US luxury wine market - value1 • Luxury category leadership to increase presence with both wholesale and retail 11.1% channel accounts • Combined portfolio en
Slide 25: A leading and iconic US luxury wine business
2 A leading and iconic US luxury wine business A renowned luxury portfolio with an impressive financial profile Treasury Americas Luxury brand portfolio Combined financial profile Metric Pro forma TAM Luxury portfolio1 US$ A$ Volume (m 9Le) 1.7 1.7 NSR ($m) 421 643 NSR/9Le ($) 248 386 EBITS ($m) 130
Slide 26: Fills a significant Treasury Americas portfolio gap
3 Fills a significant Treasury Americas portfolio gap Addresses a key portfolio gap in the US$20-$40 per bottle price point Treasury Americas Luxury Portfolio NSR1 $250 • The acquisition of DAOU fills a key Treasury Americas portfolio gap in $200 the US$20-40 per bottle price point • Strong compleme
Slide 27: A significant value creation opportunity
4 A significant value creation opportunity Leveraging Treasury Americas platform to build national distribution • Treasury Americas has a deeper luxury distribution DAOU’s category weighted distribution is currently below that of footprint across the US, leaving it uniquely placed to drive key luxur
Slide 28: A significant value creation opportunity
4 A significant value creation opportunity Taking DAOU and Patrimony international through TWE’s global distribution platform • A unique opportunity to establish DAOU and Patrimony as renowned international brands, leveraging TWE’s global scale and distribution platform • Globally, and in particular
Slide 29: A significant value creation opportunity
4 A significant value creation opportunity Material production and overhead cost synergies • Enhanced utilisation of TWE’s winemaking network, including its existing Paso Robles facility Sourcing and winemaking • Optimise sourcing for the Discovery, Journey and Reserve tiers by supplementing DAOU’s
Slide 30: Strong value creation for TWE shareholders
4 Strong value creation for TWE shareholders Transaction multiple 12.8x EBITDAS; 8.9x inclusive of synergies and net of tax benefits Implied transaction multiples • Transaction structure balanced to ensure alignment of interests with founders and the delivery of strong financial returns for TWE shar
Slide 31: Provides the scale to support a future standalone TAM Luxury division
5 Provides the scale to support a future standalone TAM Luxury division With potential to establish a global premium brands division, including TAM Premium TAM Luxury ICONS BINS NSR NSR/9Le EBITS margin A$643m A$386 36% TAM Premium NSR NSR/9Le EBITS margin NSR NSR/9Le EBITS margin NSR NSR/9Le EBITS
Slide 32: Transaction Funding & Outlook
Transaction Funding & Outlook NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 33: Sources and uses of funds
Sources and uses of funds Transaction to be funded with a combination of debt and equity, pro forma leverage of 2.5x at Jun-231 Transaction funding structure Sources and uses of funds ● US$350m acquisition bridge facility, subject to satisfying customary conditions precedent, is available for the pu
Slide 34: Details of the entitlement offer
Details of the entitlement offer ● Fully underwritten 1 for 9.451 pro-rata accelerated renounceable entitlement offer with retail entitlements trading to raise A$825 million Offer size and (“Entitlement Offer”) structure ● Approximately 76.4 million new TWE fully paid ordinary shares to be issued, r
Slide 35: Entitlement offer timetable
Entitlement offer timetable Event Date1 Announcement of Acquisition and Entitlement Offer and trading halt Tuesday, 31 October 2023 Institutional Entitlement Offer closes Wednesday, 1 November 2023 Institutional Shortfall Bookbuild closes Thursday, 2 November 2023 Announcement of results of Institut
Slide 36: Pro forma balance sheet
Pro forma balance sheet June 2023 pro forma balance sheet1 A$m1 Pro forma Acquisition TWE Equity raising Debt funding DAOU post- Impacts2 acquisition ● Pro forma balance sheet Cash & cash equivalents 566 825 490 - (1,314)3 566 illustrates the impact of the Receivables 613 14 627 acquisition and equi
Slide 37: Outlook
Outlook TWE standalone earnings outlook is unchanged from its AGM update on 16 October 2023 • TWE’s long-term financial objective is to deliver sustainable top-line growth and high single-digit average earnings growth1 • Trading conditions in the first quarter were consistent with overall expectatio
Slide 38: Appendix A – Key Risks
Appendix A – Key Risks NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 39: Key risks
Key risks This Appendix includes some of the key risks associated with any investment in TWE. TWE is subject to a variety of risk factors. Some of these are specific to its business activities, while others are of a more general nature. Individually, or in combination, these risk factors may affect
Slide 40: Key risks - acquisition
Key risks - acquisition There is a risk that the Acquisition does not complete, including if it is terminated prior to completion for non-satisfaction of a condition to completion, including as a consequence of required US regulatory approval pursuant to the Hart-Scott-Rodino Antitrust Improvements
Slide 41: Key risks - acquisition
Key risks - acquisition TWE has undertaken financial, business and other analyses of DAOU in order to determine its attractiveness to TWE and whether to pursue the Acquisition. It is possible that such analysis, and the best estimate assumptions made by TWE, has resulted in conclusions and forecasts
Slide 42: Key risks - acquisition
Key risks - acquisition Following the completion of the Acquisition, TWE will become directly or indirectly liable for any liabilities that DAOU has incurred in the past, including liabilities which were not identified during TWE’s due diligence or which are greater than expected, for which insuranc
Slide 43: Key risks – TWE and its business
Key risks – TWE and its business Unanticipated changes in consumer demand or preferences may adversely affect TWE’s ability to either capture growth opportunities or manage the supply of our Changing consumer products. These changes could be caused or accelerated by changes in economic outlook and c
Slide 44: Key risks – TWE and its business
Key risks – TWE and its business The health, safety and wellbeing of the TWE team and everyone who is involved with the TWE business remains our highest priority. TWE recognises the importance of ensuring our people stay safe through closely managing existing health and safety risks and being proact
Slide 45: Key risks – TWE and its business
Key risks – TWE and its business TWE is involved, or could become involved, in disputes, litigation and other proceedings including class actions, including with investors, consumers, clients, regulatory or law enforcement bodies, business partners and third parties. In addition to the direct costs
Slide 46: Key risks – general investment risks
Key risks – general investment risks Changes in the economic climate in which TWE operates may adversely impact its financial performance. While TWE products are sold in more than 70 countries around the world, the majority of TWE’s operations are located in, or service, the Australian, United State
Slide 47: Key risks – general investment risks
Key risks – general investment risks If shareholders do not participate in the Entitlement Offer then their percentage shareholding in TWE will be diluted as a result of the issue of new shares under the Entitlement Offer. Even where shareholders do participate fully in the Entitlement Offer, their
Slide 48: Appendix B – International Offer Restrictions
Appendix B – International Offer Restrictions NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 49: International Offer restrictions
International Offer restrictions This document does not constitute an offer of entitlements (“Entitlements”) or new ordinary shares (“New Shares”) of TWE in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the Entitlements and New
Slide 50: International Offer restrictions
International Offer restrictions Hong Kong WARNING: This document has not been, and will not be, registered as a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong, nor has it been authorised by the Securities and Futures Commission in Hong Kong
Slide 51: International Offer restrictions
International Offer restrictions Norway This document has not been approved by, or registered with, any Norwegian securities regulator under the Norwegian Securities Trading Act of 29 June 2007 no. 75. Accordingly, this document shall not be deemed to constitute an offer to the public in Norway with
Slide 52: International Offer restrictions
International Offer restrictions United Kingdom Neither this document nor any other document relating to the offer has been delivered for approval to the Financial Conduct Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 20
Slide 53: Appendix C – Underwriting Agreement Summary
Appendix C – Underwriting Agreement Summary NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 54: Underwriting agreement summary
Underwriting agreement summary TWE has entered into an underwriting agreement with the Underwriters (Underwriting Agreement), pursuant to which the Underwriters are acting as joint lead managers, underwriters and bookrunners of the Entitlement Offer. The Underwriting Agreement contains conditions pr
Slide 55: Underwriting agreement summary
Underwriting agreement summary • *any of the following occurs: (i) the commencement of legal proceedings against TWE or any member of the TWE group or against any director of TWE or any member of the TWE group in that capacity, or there is an adverse development in relation to any existing legal pro
Slide 56: Underwriting agreement summary
Underwriting agreement summary The ability of an Underwriter to terminate the Underwriting Agreement in respect of the above termination events denoted with an asterisk(*) will depend on whether the event: • has, or is likely to have, a materially adverse effect on the: (i) success of the Entitlemen
Slide 57: Appendix D – Additional Information
Appendix D – Additional Information NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 58: Supplementary information
Supplementary information NSR by sales channel (CY23e) US trade depletions by Sourcing mix - 9le channel (1H CY23) (V23e) 4% 12% 7% 2% 30% 70% 86% 89% US Trade On-Premise Grower International Off Premise Bulk DTC Owner/leased 57 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 59: Definitions
Definitions 9Le 9 litre equivalent case Premium wine Wine that is sold at a retail price point between US$8 and US$20 per bottle Commercial Wine that is sold at a retail price point below US$8 per bottle wine SGARA Self-generating and re-generating assets. SGARA represents the CAGR Compound annual g
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