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I though some of you might be interested in reading the attached article on Beringer from the Australian Financial Review.

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Locals eye $600m California wine stake

By Simon Evans
The fate of a 52 per cent stake worth about $600 million in California group Beringer Wine Estates is likely to play a key role in determining the shape of Australia's wine industry heavyweights.
Both Southcorp Ltd and Foster's Brewing Group's Mildara Blass wine unit have been eyeing Beringer Wine Estates as a target as they seek to expand their offshore production assets to become more global.
The 52 per cent controlling stake is held by investment group Texas Pacific Group and its associates, which secured its holding in 1996 before the public float of Beringer.
A major wine acquisition such as Beringer would be the trigger for Southcorp to push the button on a possible spin-off of its packaging operations, which have a book value of about $900 million.
Southcorp Packaging is one of three divisions operated by Southcorp, with a wine business and a water heaters division which produces brands such as Rheem and Solahart.
Other American wine companies which analysts believe are in Southcorp's sights include Kendall-Jackson and Sebastiani Vineyards.
But Beringer is regarded as the plum acquisition in California because of the likelihood of Texas Pacific Group selling its controlling stake, provided it receives an acceptable price for the holding.
Beringer owns six Californian wineries which produce brands such as Beringer, Meridian Vineyards, Chateau St Jean and St Clement Vineyards. It also controls more than 4,050 hectares of vineyards in the coastal regions of California.
One analyst said yesterday a factor against an Australian company buying Beringer was the low value of the Australian dollar.
The analyst, who did not wish to be named, said the market would welcome a Southcorp packaging spin-off but a major wine acquisition would need to happen first. "A more focused wine company has more appeal to investors, it's a better growth story," he said.
There would be little point spinning off the packaging division without having a major acquisition because with so much cash sitting in the balance sheet Southcorp would become a takeover target. "It's a question of timing," the analyst said.
Beringer's price-earnings multiples have almost halved from 27.7 times earnings in late 1998, which makes it an opportune time for a predator, but less likely for Texas Pacific Group to sell.
Beringer generated sales revenue of $US376.2million ($637million) in 1998-99 and net income of $US29.6million, compared with sales of $US318.4million and net income of $US12.3million the previous year.
Beringer has a market capitalisation of about $US700million.
Southcorp shares climbed 13.1¢ to close at $4.97 yesterday.

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