Sydney, Nov 28, 2005 AEST (ABN Newswire) - Simon Gilbert Wines Limited (ASX: SGV) is pleased to announce that it has, in conjunction with Mr. John Cassegrain, a shareholder and Chief Executive of Cassegrain Wines, reached agreement with the owners to acquire the Cassegrain Wines premium wine business.
Pursuant to the agreement Simon Gilbert Wines will hold 70% of the interest in the business and John Cassegrain and parties associated with him will hold the remaining 30%. Under the terms of the arrangement Simon Gilbert Wines will, in addition to holding its 70% interest, provide contract winemaking and other services to Cassegrain Wines.
This will enable the two companies to benefit from available economies of scale in production as well as from the potential synergies available from working together and sharing resources in administration, marketing, sales, distribution and purchasing. Simon Gilbert Wines anticipates considerably improved utilisation of its facilities and resources at its Mudgee winery, as well as better utilisation of the Cassegrain facilities, as a result of the acquisition.
The purchase agreement is subject to completion of due diligence and formal legal documentation.
Cassegrain Wines operates from its winery and cellar door facilities at Port Macquarie. The company, which was established in 1985, produces premium wines from fruit sourced from the premium grape growing regions of New South Wales, with a strong emphasis on fruit from Northern New South Wales and New England regions.
Cassegrain Wines sells approximately 50,000 cases of premium wine per annum, predominantly through the Australian market and through its own Cellar Door and well established and strong wine club operation. Cassegrain also sells its wines into the UK and Asian wine markets. It has considerable potential to expand its sales of packaged premium wines into other key wine markets of the world. A number of Cassegrain's wines have been highly rated by local and international wine experts and have won a number of major awards including five trophies for the Cassegrain 2002 Shiraz, with best NSW red wine at the NSW industry awards, and in the 'nineties the James Irvine trophy for best new red wine exported to the UK and the Maurice O'Shea trophy for best Hunter Valley white wine. For the 2005 financial year Cassegrain Wines' revenues totaled approximately $5.6 million. The business reported a profit of $200,000 EBIT for 2005, after booking one-off losses of near $150,000 attributable to machine breakdowns.
Simon Gilbert Wines and John Cassegrain have agreed to jointly acquire the Cassegrain wine business on the expectation that combining the resources of the two operations in production, sales and distribution will significantly improve the financial performance of both businesses, with most of the benefits expected to come through after the initial restructuring period and through the second and third year following completion of the acquisition. Simon Gilbert Wines believes that the value of the net tangible assets to be acquired (inventories and plant and equipment), is between $3.0 and $3.5 million. A final valuation of the assets, including a valuation of the brand and other intangibles, will be provided upon completion of due diligence.
Simon Gilbert Wines has agreed to lease the land, buildings and vineyards surrounding the winery on terms that will ensure that Cassegrain Wines is able to operate from its existing facilities at Port Macquarie on an ongoing basis with the public restaurant and other facilities being operated by John Cassegrain. The consideration for 100% of Cassegrain will be $3.75m, payable as follows:
$1,000,000 on settlement (Simon Gilbert Wines portion being $700,000),$500,000 (Simon Gilbert Wines portion being $350,000) in 6 months,$600,000 (Simon Gilbert Wines portion being $420,000) in 12 months,$650,000 (Simon Gilbert Wines portion being $455,000) on 30 November 2007, andThe assumption of $1.0 million of liabilities (Simon Gilbert Wines portion being$700,000), other operating liabilities to be offset by receivables. CassegrainWines will continue to collect receivables, with the vendors having agreed toprovide the usual warranties and terms in relation to liabilities and receivables.
It has been agreed that Cassegrain inventories will be sold down to assist meeting these repayments.
Simon Gilbert Wines has agreed to issue a convertible note to the value of $455,000 expiring on 30 November 2007 in relation to its portion of the final payment. The key terms of the note are as follows:
Expires 30 November, 2007Repayable in full at the end of the termRight to repay at any time before expiryConversion right to ordinary shares at 20cNo interest payable on the noteSecond ranking charge against the assets of Cassegrain (first charge not to exceed $500,000).
The note will be issued shortly following completion of the transaction, planned for December 2005.
Settlement will follow completion of Due Diligence, subject to an unqualified result, and legal documentation. A full update on the transaction will be provided to the market on completion. The Board of Simon Gilbert Wines is pleased that the company is able to undertake this key initiative to advance the development of Simon Gilbert Wines.
The Board is confident that bringing the resources of Simon Gilbert Wines together with the Cassegrain brand in a mutually beneficial combination is a major step forward in the consolidation strategy backed by existing and new shareholders in June 2004. Simon Gilbert Wines will continue to pursue suitable and value adding strategic merger and acquisitions opportunities to grow the business.
Further details on the Cassegrain brand and its wines are available at the company's website www.cassegrainwines.com.au
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