Carlyle splashes $770 million on Australian winemaker with eye on China

SYDNEY (Reuters) - Buyout giant Carlyle Group LP CG.O will buy Australia's Accolade Wines from a local private equity firm for A$1 billion ($770 million), triple what the Australians paid seven years ago and underscoring the investment appeal of China's wine market.

FILE PHOTO: A general view of the lobby outside of the Carlyle Group offices in Washington, U.S., May 3, 2012. REUTERS/Jonathan Ernst/File Photo

The sale of Accolade, Australia’s No. 2 wine producer and owner of the Hardys and Banrock Station labels, by CHAMP Private Equity comes as Australian wine exports struggle to keep up with growing demand from China’s middle-class.

The Australian export bonanza has been spurred on by a free-trade agreement between the countries since 2015 which has seen China cut import tariffs on Australian wine from as high as 20 percent to about 3 percent.

“This is a company with great brands and strong market positions, with multiple growth opportunities, particularly in Asian markets,” Carlyle said in a statement which did not mention China specifically.

Australian wine sales to mainland China jumped 63 percent to a record A$848 million ($651 million) in 2017, putting Australia behind only France, official figures show. Australia’s winemakers expect to benefit further from China’s plan to raise tariffs on U.S. wine imports.

Accolade does not break out its China export figures but CHAMP Chief Executive Officer John Haddock told Reuters the company expected to grow China exports 80 percent in 2018, from a small base. Total exports were about A$350 million.

“That’s a growth that will be around for many years to come,” Haddock said in a telephone interview.

CHAMP planned an initial public offering of Accolade 18 months earlier but canceled it when Britain’s vote to leave the European Union prompted it to phase out some low-margin British sales and focus on growth in Asia.

Two of Carlyle's main competitors, TPG Capital Management LP and KKR & Co LP KKR.N, made rival bids for larger Treasury Wine Estates Ltd TWE.AX for about A$3.4 billion in 2014. Treasury rejected the offers and now has a market capitalization of A$12.4 billion based on Thursday's share price.

A surge in Chinese exports helped Treasury post record half-year profit in March, only five years after it was forced to pour out thousands of liters of unwanted wine out in an unceremonious exit from the U.S. market.

Treasury shares were up as much as 3 percent on Thursday, while the broader market was up 0.6 percent.

Carlyle's purchase includes a 20 percent stake held by Accolade's previous owner, Constellation Brands Inc STZ.N.

Reporting by Byron Kaye and Tom Westbrook; Editing by Stephen Coates