Australia's Treasury Wine rejects US$2.9b bid from KKR

Australia's Treasury Wine Estates is betting on its Penfolds brand and a cost-cutting new chief executive to boost earnings and justify its decision to reject a US$2.9 billion takeover offer from private equity giant Kohlberg Kravis Roberts (KKR).

The world's No 2 winemaker declared its glass was half full as it announced it had rejected KKR's bid as too low, sending its share price above the bid value as investors rushed to get in before any new offers from other parties.

Asia's growing appetite for wine, the value of the Penfolds label and continued restructuring are helping turn perceptions of Treasury's prospects around after a poor 2013 saw profits slump 38 per cent in the six months to February.

"The KKR bid presumably is based on the old earnings expectations and the board's backing the new CEO to run the business a lot better than previous management," said Morningstar analyst Daniel Mueller. "Penfolds has a lot of brand value that would be worth a lot. I would think they would hang on to all [wine labels] in the absence of some ridiculous offer."

Melbourne-based Treasury said US firm KKR made the offer on April 16. The winemaker had planned to keep the offer secret but disclosed it after KKR approached investors directly.

KKR confirmed that it had made the offer and had discussed it with Treasury shareholders in the past week. A spokeswoman for Wellington Management, Treasury's biggest shareholder, declined to comment.