Indian Wine Group Puts Deal On Ice

The Age

Saturday October 25, 2008

Scott Rochfort

THE country's third-largest winemaker, Australian Vintage, has been dealt another blow, with the planned $60 million sale of its South Australian Loxton Winery being delayed a second time.

The wine company, formerly known as McGuigan Simeon, said yesterday the buyer of the winery, India's Champagne Indage, had failed to get financing in place to complete the deal that was originally announced in March.

"It's only in the last 24 hours or so that they notified us that they wouldn't be able to complete the purchase by October 31," Australian Vintage chief executive Dane Hudson said.

Australian Vintage said in a statement that Indage "remains committed to purchasing the winery but that market conditions have meant that alternate funding now needs to be sought".

But the deal is looking increasingly shaky. According to several Indian media reports, Indage is now seeking to raise 1.2 billion rupees ($A37.5million) in new shares.

Mr Hudson insisted Australian Vintage would still be able to service its $155 million of bank borrowings, despite originally hoping to use $40 million from the Loxton sale to repay debt.

"The industry has been pretty tough for three years now and we've demonstrated that we can manage our cash flows and pay our debts," Mr Hudson said.

The Indian company also failed to honour an agreement to pay Australian Vintage a $3million deposit on Loxton last week.

"To date we haven't received the deposit but that is part of the discussions we're having with them at the moment," he said.

Mr Hudson said Australian Vintage had some alternatives if the sale fell through, but declined to say what they were. It is expected the company will still go ahead with the 2009 vintage at Loxton if the Indage sale falls through.

When the deal was first announced in March, Australian Vintage said it planned to use $40 million from the sale of the South Australian facility towards reducing its $150 million of debts.

The rest of the proceeds were expected to go towards upgrading the rest of Australian Vintage's remaining winery in the Hunter Valley.

Mr Hudson also conceded that Australian Vintage, which generates 35% of its revenues in Britain, faced a challenging time.

"The UK is such a big part of our business, and obviously they are economically stressed," he said. "A lot of product at the moment is at the aggressive value end."

Despite the bad news, Australian Vintage shares rose 1 to 65.

Indage did not return calls. The company established a foothold in Australia through its purchase of the Tandou winery in South Australia last year.

Shares in Indage have plunged more than two-thirds on the Mumbai Stock Exchange in recent months, and the company now has a market value of $69 million. It is unclear if the funds from the capital raising are intended to fund the Loxton deal or pay off Indage's own borrowings.

© 2008 The Age

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