In an ASX update responding to recent media speculation, Australian Vintage Limited (AVG) has confirmed that it is currently “in exploratory discussions with Accolade” in regards to a potential merger deal.
Whilst still in its early stages, if the deal between Australia’s second and third largest wine producers proceeds it could signify the largest change in Australia’s viticultural industry of the decade.
“As noted in AVG’s Half Year 31 December 2023 results released to ASX on 21 February 2024, AVG’s Strategic Review has identified a number of initiatives with the potential to maximise shareholder value, including potential transformational mergers,” said the ASX Reponse to Media Speculation announcement.
“AVG confirms it is in exploratory discussions with Accolade, however these discussions are still at a very early stage, and there is no certainty that any transaction will eventuate,” it continued.
Accolade Wines has chosen not to respond to the rumours, stating it does not comment on speculation.
Both Accolade Wines and AVG have been facing challenges as a result of the current difficult industry conditions caused by oversupply and the ongoing tariffs in place on exports to China. Despite this, AVG’s recently released half year results revealed that it managed to maintain revenue in line with the year prior.
“Our result is in line with our expectations,” said Chief Executive Craig Garvin.
“Given the trading environment, and the challenging industry conditions, I am very encouraged we have been able to maintain revenue in line with the prior year and improve earnings in contradiction to industry trends.”
Accolade Wines has also been facing severe economic pressures, which have culminated in Australian Wine Holdco Limited (AWL) taking equity ownership of the debt-riddled company in a recapitalisation plan that seeks to ensure its continued profitability.
“This agreement (with AWL) is great news for Accolade, our customers, our suppliers and our people,” said Robert Foye, CEO.
“Like all Australian winemakers, we have been hit by a number of challenging macro-economic and industry headwinds in recent years.
“Despite our strong stable of brands and leadership positions in key markets, as well as operational measures taken to strengthen the business, our ability to respond to these challenges and grow has been hampered by an unsustainable balance sheet.”
The pressures faced by Australia’s wine industry has been affecting all levels from large-scale producers to grape growers. Last week, Riverland wine growers met with government to discuss the unsustainable economic situation they are facing that requires urgent financial support.
Unfortunately, current industry pressures are not expected to lessen any time soon.
