DB to sell Corbans as buyers queue up

By DITA DE BONI

DB Group has ditched plans to find a joint venture partner for wine division Corbans, opting instead to sell the business by the end of September.

Once again Foster's is named by industry sources as ready to buy the business, followed by fellow Australian liquor concerns Southcorp and BRL Hardy, which has recently indicated it wants to buy Nobilo Wines.

Managing director Brian Blake said DB had decided three weeks ago to sell Corbans, after realising a sale would be the best way to "maximise shareholder value."

It is believed the drive to divest Corbans comes from DB's 75 per cent owner, Asia Pacific.

Mr Blake would not disclose the price sought for Corbans, but several analysts concurred with a recent PricewaterhouseCoopers valuation of $130-$146 million.

DB was not currently in negotiations over Corbans, but agent Salomon Smith Barney had a list of prospective buyers, "both international and Australasian," which would be sorted through in the coming months, Mr Blake said.

The announcement comes after another disappointing half-year result for Corbans.

The wine operation's pre-tax earnings have fallen this year to $4.74 million, from $6.8 million at the same time last year, despite revenues increasing slightly to $56.3 million.

Mr Blake admitted ongoing distribution problems might be reflected in the price Corbans eventually fetched on the market, although the $50 million invested in the company over the last five years would offset that.

He said the problems were a result of an overstocking situation and were correctable.

"Corbans is a strategic asset in the Australasian wine scene. Our wineries are world-class. But we recognise there is a lot of unrealised potential in the business."

Despite Corbans' less-than-stellar result, the group's brewing division reported growth in revenue from last year's $149.1 million to $151.6 million in the six months, while earnings almost doubled, from $12.3 million last year to $22.7 million in the same period.

Mr Blake said the group was delighted with the division's result.

"Brewing, our core business, is exactly where we want it to be. We have focused on improving margins, managing prices better and working hard to drive premium sales."

Overall, the company's sales for the period, of $347.6 million, showed a slight drop, compared with $349.2 million last period. Pre-tax earnings jumped 34 per cent to $31.3 million, from $24.3 million previously.

Shareholders' equity dropped to $229.2 million from $237.6 million and net operating assets fell from $317.2 million to $250 million.

An interim dividend of 8 cents will be paid on June 16.

Mr Blake predicted DB would turn in a similar year-end, pre-tax profit to last year's $39 million because of the zero contribution of disbanded Allied Liquor.

Analysts yesterday responded positively to DB's half-year announcement.

Merrill Lynch's Warren Doak said the company had turned in an excellent brewing result, for which DB management could take credit.

"Within an environment conducive to an increase in the sale of premium beers, DB has been well positioned with its products like Heineken to take advantage of trends."


DB Group shares finished up 10 to 275c at close of trade yesterday.