Delegat's hopes to pluck $300m listing

Delegat's Wine Estate hopes to list on the NZX with a market value of around $300 million as investors bet a weakening kiwi dollar and rising production will underpin the winemaker's earnings.

It has told potential investors in its long-awaited share offer that trading profits will grow from $18 million in the year to this June to around $40 million in the following year.

Competitors were valued debt free at seven to 11 times next year's trading profits. This suggested a market value between $217 million and $377 million after accounting for an estimated $60 million to $65 million debt.

The Delegat family expects its shareholding to drop from 100 per cent to as low as 65 per cent, suggesting about $104 million of Delegat's shares will be offered to the public.

It is not clear how much of that sum will be reinvested, but it has to repay $35 million from capital notes issued in 2004.

The company, New Zealand's third-largest wine exporter, is also in the final stages of building a $70 million winery in Marlborough. The company expects this facility to help drive the profit growth.

A spokesman for ABN Amro Craigs, which is advising Delegat's on the possible float, said no decision had been made on whether to proceed.

The float has been on the cards since the middle of 2004, but has been delayed several times. The latest delay came last year after a protracted takeover battle for one of Delegat's key suppliers - Oyster Bay Vineyards.

Delegat's got into a bidding war with Marlborough grower Peter Yealands, who later forced Delegat's to lift its offer from $3.10 a share to $6. Delegat's wanted to lift its holding to 50.1 per cent of the shares on issue and yesterday declared its offer unconditional.

That delay was hugely costly for Delegat's as it triggered an increase in the interest rate on the notes from 9.75 per cent to 11.25 per cent, the equivalent of $1460 a day. This is on top of the about $3.41 million in interest it pays note holders.

There is a generally positive air of expectation in the market about the float.

Some brokers highlight general concerns about the state of the global wine market and the fickleness of stocks that are weather dependent.

But Delegat's has strong brands, particularly when Oyster Bay is included - which, of course, proved to be worth more than most people thought. The strength of both brands is also likely to ensure good levels of interest from retail investors.

The company, led by managing director Jim Delegat and his sister, Rosemari, was founded by their parents, Nikola and Vidosava, in 1947 after emigrating from what is modern day Croatia.