AWH surfs South West wine wave

AUSTRALIAN Wine Holdings has announced its second purchase in a week, but claims the moves are little more than testing the systems before a much bigger acquisition, possibly around the $7 million mark.

The former Hotham Wines bought Margaret River-based Bunker Bay Wine Group this week in a scrip deal worth $675,000, shortly after it paid almost $3 million for Manjimup’s Chestnut Grove Wines.

AWH executive chairman Mike Calneggia, for whom the Bunker Bay deal was a related party transaction, said the two buyouts were a trial run for much bigger transactions in the future.

“What we are doing is getting the methodology right,” Mr Calneggia said.

“The larger the acquisitions, the longer they take.

“There are a lot more to come.”

He said he had held about 15 per cent of Bunker Bay for several years, having helped establish what was to be a virtual wine company supplied by his contract winemaking operation, Selwyn Wines.

More than two years ago, Selwyn was merged with Evans & Tate to provide the scale needed to float the company.

Bunker Bay had developed a good distribution system, providing some private labels to major customers, but Mr Calneggia believes the concept would work better within the new framework where the listed entity AWH would be the hub and each wine business would be a division with its own identity.

He said the company planned to give Bunker Bay a home in a popular part of Margaret River and promote its connection with surf culture through brands like Left Handers, Guillotines, Super Tubes and other names familiar to South West surfers.

“We see a Mambo style culture within a wine asset,” Mr Calneggia said.

Born from the collapse of short-lived float Hotham, AWH plans to capitalise on the growing pain within the wine sector.

Mr Calneggia denied the company was a vulture fund because it kept assets intact, and said it wasn’t a corporate doctor either because it wasn’t for hire.

“We are the reverse of a vulture fund. We are taking poorly performing companies and putting the turbo on them,” he said.

“We are a counter cyclical investor.”

Mr Calneggia said AWH was avoiding the romantic side of the business.

“We are taking advantage of being closer to the wine business than most,” he said.

The company’s purchase of Chestnut Grove did not include the land and buildings, which have instead been leased long term.

But Mr Calneggia thinks some form of home is important, even if the company doesn’t own it.

“Bunker Bay always suffered from not having a location,” he said.

Bunker Bay generated sales of 17,500 cases last year, while Chestnut Grove sold 10,000 cases through its label by the same name, and the Peppermint Creek brand.

Mr Calneggia and his investment partners rescued Hotham in a deal which valued the company at about 4 cents a share.

Shares have since traded as high as 6 cents but on Tuesday they were sitting at 4 cents at closure, giving the group a market capitalisation of $9.5 million.

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