Diageo To Unveil Wines Sale To Aussie Suitor

Diageo (LSE: DGE.L - news) , the FTSE-100 drinks group, is to accelerate its restructuring by agreeing a sale of a major chunk of its wine division to the Australian owner of Lindemans.

Sky News has learnt that Diageo, which owns brands such as Blossom Hill and Piat d'Or, was poised to sign a deal on Tuesday to offload parts of its UK and US wine operations to Treasury Wine Estates.

It (Other OTC: ITGL - news) will be the latest in a string of deals agreed by Diageo as it seeks to refocus on higher-margin and faster-growing businesses amid pressure from some shareholders to improve its performance.

Sources said a deal could be announced by Treasury to the Australian stock exchange when it opens on Wednesday morning, with Diageo expected to confirm it hours later.

Treasury, which is run by Michael Clarke, a former chief executive of the UK-based Premier Foods (LSE: PFD.L - news) , is expected to acquire most of Diageo's leading wine brands, which in the UK are incorporated under Percy Fox & Co.

They include Sterling Vineyards, Antares and Yellow Tail, as well as Blossom Hill and Piat d'Or.

Treasury is also understood to be buying Diageo's Chateaux & Estate Wines business in the US, but the UK wine merchant Justerini & Brooks, which has held a royal warrant since 1760, is not thought to be part of the transaction.

Diageo's wine operations account for less than 5% of its global sales, meaning that the transaction is likely to have little impact on the company's shares.

Insiders declined to comment on the price, although they indicated that it would be in the hundreds of millions of pounds.

Treasury already owns Penfolds, Wolf Blass, Lindemans, Matua and Rosemount, and is one of the biggest producers in the world.

There has been growing pressure from some investors on Ivan Menezes, Diageo's chief executive, amid a slowdown in emerging markets and currency weakness.

However, a recent trading update offered him some respite, with Mr Menezes saying that the financial year had started well and that sales growth would be better this year than in 2014.

Last week, Diageo announced a three-part asset swap with Heineken (Other OTC: HEINY - news) which strengthens the UK company's presence in Africa and sees it hand over control of Red Stripe.

The wines disposal would unwind a chunk of the deal struck by Mr Menezes' predecessor, Paul Walsh, in 2000 when Diageo bought parts of Seagram in a £5.5bn joint bid with France's Pernod Ricard (Paris: FR0000120693 - news) .

Diageo has been going through a turbulent period, with sales in emerging markets such as Venezuela and China experiencing sharp slowdowns, and an intensifying row about the stewardship of its majority-owned Indian operations.

Mr Menezes said of the recent sales figures, which were partly the result of adverse currency movements: "Our performance in the quarter reflects continued tough conditions in the emerging markets and subdued consumer demand in some developed markets.

"However, it also reflects the actions we have taken to ensure we are building a stronger business.

"We will continue to strengthen Diageo. We are investing in our brands, enhancing our route to consumer, introducing great innovations ... winning in reserve and focusing on cost and cash. We can realise Diageo's full potential and deliver our performance ambition."

The company's brand portfolio also includes Captain Morgan rum, Johnnie Walker whisky and Baileys.

In addition to its wine division, Diageo recently announced the sale of Gleneagles, the hotel and golf resort which staged last year's Ryder Cup.

Diageo declined to comment.