What Happened to Treasury Wine Estates Share Price?
Shares in winemaker Treasury Wine Estates Ltd [ASX:TWE] rose sharply today, gaining almost 4% to close at a new 12-month high. The stock is now breaking out of the range it’s tracked since the company came into play as a takeover target.
Why Did This Happen to TWE Shares?
Treasury Wine Estates has been subject to takeover rumours for months now. Back in mid-April, US private equity firm KKR and Co. L.P. [NYSE:KKR] offered $4.70 per share to take the company private…an offer it sweetened by a further 50 cents last week.
Today the takeover drama stepped up a gear, and a fight is looming. Reports have emerged that KKR’s rival TPG Capital, L.P. has launched a rival bid for TWE, priced similarly to KKR’s offer.
There’s no certainty that either proposal will lead to a sale of the company. But since it’s been reported that TWE is granting TPG access to its financial records, it’s looking increasingly likely that one of these cash-up private equity groups will bag the winemaker.
In any case, today’s news certainly vindicates investors who had bid TWE shares up beyond $5 per share over the past few months. A higher likelihood of a payday for TWE shareholders has the market excited today.
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What Now for Treasury Wine Estates Ltd?
You should recognise that buying any stock because it’s viewed as a potential takeover target is a high risk strategy. Potential suitors can get cold feet very quickly if they find anything ugly in the data room.
But on the flipside, if both private equity bidders like what they see in TWE’s books, we could see a shootout where shareholders receive higher and higher offers. And the two genuine bids for the company should put a floor under the stock price for now.
Enjoy TWE’s products if you like, but don’t buy the shares now on the basis that either of these proposals will gain board approval. There’s more water to go under the bridge before this deal is sealed.
Cheers, Tim Dohrmann+
Small-Cap Analyst, Australian Small-Cap Investigator
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The post Why the Treasury Wine Estates Ltd Share Price Took Off Today appeared first on Stock Market News, Finance and Investments | Money Morning Australia.
