Kohlberg Kravis' Takeover Offer Spurned, Shares Fall - Analyst Blog

Share price of Kohlberg Kravis Roberts & Co. KKR declined 1.8% after Treasury Wines Estate, the Australia-based global winemaking and distribution company turned down its takeover bid recently. The bidding price of A$3.1 billion ($2.9 billion) by the U.S.-based private equity firm failed to meet the expectations of this Australian winemaker.

However, following this news, ADRs of Treasury Wines gained nearly 14.7%. The bullish stance of the investors was based on the expectation that Kohlberg Kravis might raise its offer.

The private equity firm had bid for the takeover on Apr 16. However, Treasury Wine's advisor The Goldman Sachs Group, Inc. GS recommended the company to disclose the details of the bidding only recently after discovering that Kohlberg Kravis' advisor Nomura Holdings, Inc. NMR had contacted some of its shareholder with regard to the takeover.

Treasury Wines has been facing tough times following the write-down of its U.S. business as well as decline in sales in China. However, with the overall improvement in the Australian wine market, we believe that the scenario will somewhat change. As per market research firm IBISWorld, the Australian wine industry is expected to stabilize by 2019 driven by improvement in sales in Asia.

Kohlberg Kravis, known for its efficient inorganic growth strategies, is always on a lookout for companies that are facing trouble now but has solid growth potential. Given the long-term growth prospect of the wine industry in Australia, Treasury Wines seems to be a lucrative opportunity for Kohlberg Kravis. So the company might increase its bid.

Some of the latest deals of Kohlberg Kravis reflect its impressive investment story driven by meaningful acquisitions. The company is not only intent on expanding globally, but also aims to expand its portfolio across diverse sectors.

Moreover, as per a Reuters report, Kohlberg Kravis is close to inking a deal to acquire Goodpack Ltd., a Singapore-based company that provides packaging alternative for bulk cargo. The acquisition, if it materializes, would be one of the largest investments by Kohlberg Kravis in the Asia Pacific region lately.

Kohlberg Kravis currently carries a Zacks Rank #2 (Buy). Other investment manager worth considering includes Affiliated Managers Group Inc. AMG with a Zacks Rank #1 (Strong Buy).