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Treasury Wine Estates buys Daou Vineyards for US$900 million

Penfolds owner Treasury Wine Estates has agreed to acquire California’s Daou Vineyards to “fill a gap” in its luxury offering.

Speaking of the reason behind the decision to acquire Daou Vineyards, Tim Ford, chief executive of Australia’s Treasury Wine Estates (TWE), said that Daou’s wines speak to a shift in consumers looking for higher-priced wines.

“It’s right in the sweet spot,” Ford said this week. “We’re moving to where the consumer is going.”

Around 69% of Daou’s sales come from bottles priced at US$20 to US$40. A further 13% of sales are for wines priced at US$100+ per bottle.

TWE will buy the premium California winery for an upfront cost of $US900 million, plus an earn-out agreement of up to US$100 million, which applies if certain revenue targets are reached until the end of 2027.

According to Ford the acquisition follows two years of “closely monitoring” Daou, and months of negotiations regarding the sale. No other companies were competing with TWE to buy the estate.

“I think we’ve paid the right price for this business,” Ford said. “We also think it’s early in its growth curve.”

Ford revealed in a statement that Daou currently generates 98% of its sales within the US, but that the producer had the potential “to go global.”

He added that the implied multiple of 12.8 times projected calendar 2023 earnings was a fair price.

Daou is forecast to generate sales of US$212 million in the 12 months to 31 December.

Founded by brothers Georges and Daniel Daou, who grew up in Beirut, Daou Vineyards came to fruition in Paso Robles, California in 2007. It is especially well-known for its Cabernet Sauvignon-based wine Patrimony.

While Ford stated that: “We have grand plans for Daou to become the next brand with the international scale and luxury credentials of Penfolds,” he batted away the suggestion that Penfolds would be impacted by the acquisition.

“We believe we can have a very strong second business next to Penfolds,” Ford said. “Penfolds is not going to be starved of any capital.”

Daou is the second Californian wine business that TWE has bought in the last two years, having snapped up Frank Family Vineyards for $315 million in 2021.

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