Australian Vintage Limited resumed trading this week following a voluntary three-week ASX suspension to raise capital and would like to reboot merger talks with Accolade Wines.
The company’s share price almost halved during the suspension. They last traded at 34.5¢ before the trading halt and suspension from May 22. They closed closed 16¢ lower at 19¢ at the end of trade yesterday.
Australian Vintage Chairman Richard Davis said the 45% share slide was expected but necessary to put the company better position to pursue a merger.
He also said Australian Vintage would like to revive talks with Accolade Wines.
In late May Australian Vintage advised 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”.
Davis said this week: “If they were to come back to us, then we would certainly be interested.”
The company announced to the ASX on 13 June that during its trading halt it had received:
- Strong demand from a range of existing and new investors
- Placement and Institutional Entitlement Offer fully subscribed and will raise approximately
$15.0 million - In conjunction with the debt extension and facility increase initiatives announced to ASX on
11 June 2024, AVG expects to raise at least $45 million of total incremental capital1 - Incremental capital provides enhanced levels of liquidity and financial flexibility and better
positions AVG to capitalise on future growth opportunities and execute its Strategic Plan - Retail Entitlement Offer opens on 18 June 2024 and has the potential to raise up to an
additional ~$4.9 million
Davis, who has been chairman of Australian Vintage for nine years, will retire once the $20 million equity raise is completed. John Davies will be appointed interim chairman. Current director Naseema Sparks will not seek re-election at this year’s AGM.
Acting CEO Peter Perrin said: “The capital structures initiatives announced today are designed to provide more adequate levels of liquidity and financial flexibility to navigate the volatile conditions and enable the business to capitalise on future opportunities, including potential consolidation.
“I would like to thank Richard [Davis] for his dedication and service to the company over more than 15 years. He has made an invaluable contribution and will be missed.”
Australian Vintage’s Retail Entitlement Offer will open on 18 June 2024 and close at 5pm AEST on 2 July 2024.
Revised sales expectations for FY24
Australian Vintage gave a trading update this week and said it now expected full-year sales to be in the range of $257million to $261million, in line with 2023 but lower than internal expectations. Net debt as at June 30, absent the capital raising, was expected to be $70million to $75million, higher than the $43million to $50million previously expected.
The company pointed to highlights including:
- AVG maintaining and growing market share in key markets
- Being the global leader in ‘no-and-low’ wine
- Its new innovation range introduced in FY23 starting to take hold with additional innovation to
be launched in 1H 2025 with higher margins.
Davis said the red wine glut had been particularly challenging for the company.
“There is so much red wine, so you can’t get pricing,” he said.
“I won’t say it’s irrational behaviour, because if people have got excess wine, obviously they’re going to try and move it to realise it into cash.
“But that puts pressure on the whole industry. You’ve got China starting to open up, so that will take up some of the excess. There is signs of people exiting the industry, which will see a rebalancing, but it’s not going to happen over the next six months or 12 months. It will take a couple of years and if you look over the history of the wine industry, this has happened before and no doubt will happen again.”