Rosemount Estate’s owners, the Oatley family, neither confirm nor deny that it is in the process of merging with Southcorp Wines, although industry sources confirm the two companies are presently having discussions. Despite recent speculation in the Australian Financial Review that Southcorp is on the verge of ‘swallowing’ Rosemount, the Oatleys ‘guarantee that Rosemount is not being swallowed by anyone’. Instead, Rosemount’s staff have been advised that the Oatleys will retain a leadership presence within the Australian wine industry. This news follows a stablisation of Southcorp’s share price after a dramatic 20% increase since the sale of its packaging division to Visy Industries for $830 million on February 1. The rise was attributed to strong speculation that either Allied Domecq plc, the jilted suitor for New Zealand’s largest wine producer Montana, or Diageo was looking to make a hostile takeover. There is little doubt that Southcorp is presently extremely vulnerable and also that the wine industry does indeed perceive difficulties within the company. Australia’s fifth largest wine producer and largest family-owned wine company, Rosemount Estate is also the most profitable of any of the Australian wine companies, including the listed companies. Sources suggest that it is more likely that Rosemount’s expertise and management would come into Southcorp’s business than vice-versa. On the surface, some sort of merge makes exceptional sense for both parties, since Southcorp is not presently hugely focused on the Upper Hunter Valley, McLaren Vale and Mudgee, the cornerstone regions behind Rosemount’s key brands. Recent wine industry deals would presently value Rosemount around $1.5 billion, since its EBIT for 2001 is expected to exceed $100 million. Southcorp’s expected EBIT for 2001 is likely to be around $150 million. Later this month Southcorp is expected to initiate a $340 million share buy-back scheme to give it more say in its own destiny. It’s easy to understand why it is keen to push ahead quickly with the Rosemount deal, since such a purchase should put it out of reach to most potential purchasers.
