Australian Vintage has announced that Accolade Wines’ failed buyout offer to Riverland growers has put an end to merger talks between the two drinks giants.

More than 500 growers who are part of the CCW Co-operative based in South Australia’s Riverland region rejected the buyout offer from Accolade Wines last week.

Australian Vintage subsequently suspended trading of its shares on the ASX on 27 May, advising that its debt levels were likely to be more than 50% higher than expected by June 30, rising to between $70 million to $75 million. It had previously guided between $43 million to $50 million.

Australian Vintage is now seeking alternative capital raising options.

The Australian Financial Review reported: “Street Talk understands Australian Vintage was warming up investors for a circa $30 million raising, in a deal expected to be done at a high double-digit discount.”

“Australian Vintage requests that the suspension continue until such time as Australian Vintage releases an announcement to ASX in relation to the proposed capital raising, debt refinancing and trading update, which is expected to be on or around 11 June 2024 and expects that the suspension will be ended by this announcement,” it said.

Australian Vintage advised that it had entered into preliminary discussions with Accolade Wines in relation to a potential merger and had undertaken preliminary two-way due diligence, which was largely completed by mid-April 2024.

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

However, on 22 May 2024, Australian Vintage received correspondence from Accolade, via its advisors, that Accolade and its senior lenders were “not in a position to continue discussions further at this time”.

“While Accolade’s advisors declined to provide any further detail, AVG notes that this guidance was received shortly after the CCW Co-operative Limited (CCW) Annual General Meeting (AGM), which was held on 21 May 2024, and which voted down a
Special Resolution to restructure Accolade’s largest grape supply contract, the Preferred Supply Agreement,” Australian Vintage said.

Australian Vintage said if its shares commenced trading on the ASX it would be “materially prejudicial to its ability to source additional capital” and its ability to continue to be financially viable. It said that $15 million of existing bank capacity was due to expire in July 2024, reducing its overall bank capacity to $78 million.

The Australian has reported that Accolade decided to walk away from the merger with Australian Vintage following the shock termination of CEO Craig Garvin.

“It is believed Accolade was unwilling to proceed with a merger following the departure of Mr Garvin, who was seen by Accolade as the natural person to run the combined group if the merger took place,” The Australian said.

Sale negotiations heat up between Accolade and Pernod Ricard

While Australian Vintage said Accolade had walked away from merger talks due to the failed Riverina grapegrowers’ buyout deal, The Australian has reported that Accolade Wines is believed to be progressing with talks on a deal to buy Pernod Ricard Australia.

Sources said Accolade Wines’ negotiations with Pernod Ricard were “moving closer to a merger transaction”.

Speculation about a possible Accolade-Pernod Ricard deal has been swirling since earlier this month.

The Australian reported that Pernod Ricard has “had a suite of Australian assets up for sale through JPMorgan and Morgan Stanley”, while the Australian Financial Review said Pernod Ricard’s Australian assets “could fetch a price tag of about $500 million”.

When rumours of a sale first surfaced late last year, a spokesperson said: “Pernod Ricard notes the recent market rumours regarding its potential divestment of its wine activities in Australia and New Zealand. Pernod Ricard regularly assesses and evaluates its strategic opportunities and is continuously exploring options, including divestments or the streamlining of some or part of individual business units. 

“This is a usual process in line with management’s mission of delivering value to shareholders, employees, clients and stakeholders. Pernod Ricard nonetheless highlights that, at this stage, no decision has been made regarding any particular action.”

When asked to comment on the latest rumours, a spokesperson for Pernod Ricard said: “We never comment on M&A rumours and so therefore are not in a position to provide any statement relating to this subject.”

Sources told Street Talk that if discussions between Accolade and Pernod Ricard remained on track, a deal was likely to be signed by the end of May.