Australian Vintage enters trading halt after Accolade pulls pin on merger discussions

Australian Vintage Limited has suspended share trading and announced an emergency capital raising after receiving correspondence from Accolade Wines stating it was “not in a position to continue further discussions [about a potential Accolade/AVG merger] at this time."

The letter was received on May 22 shortly after Accolade’s buyout offer to its Riverland CCW growers was rejected by a landslide vote.

In Australian Vintage's Request for voluntary suspension announcement published to the ASX yesterday, the wine producer revealed its “net debt is expected to be in the order of $70 - 75m as 30 June 2024,” almost double the $43-$50 million previously forecasted. 

A further $15 million of existing bank capacity is also due to expire over coming few months, reducing Australian Vintage's bank capacity, including overdraft facilities, to approximately $78 million.

As a result, Australian Vintage “believes that commencing trading would be materially prejudicial to its ability to source additional capital which is critical to support its continued financial viability and operations.”

According to the Australian Financial Review’s Street Talk, 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.”

Both Accolade Wines and Australian Vintage have experienced pronounced financial pressures over recent months. This includes Australian Vintage recently cancelling the lease on a major Riverina vineyard seven years ahead of its scheduled expiration date. 

Accolade Wines has also been experiencing a period of recapitalisaiton and restructuring after being taken over by new equity owners Australian Wine Holdco Limited in February this year. Since then, Accolade entered into discussions surrounding both a potential merger deal with Australian Vintage and a potentially $500 million sale of key brands to Pernod Ricard. 

Australian Vintage received correspondence last Wednesday that discussions with Accolade concerning a merger deal were to be halted for the time being. 

“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,” said AVG to the ASX.

Australian Vintage has requested that the voluntary suspension from share trading continue up until about 11 June, at which point it will release “an announcement to ASX in relation to the proposed capital raising, debt refinancing and trading update.” The wine producer “expects that the Suspension will be ended by this announcement.”