Australian Wine Holdings Ltd has conditionally agreed to sell its wine distribution business, Wine Shack Pty Ltd, to a company associated with its managing director Mike Calneggia.
Australian Wine Holdings Ltd has conditionally agreed to sell its wine distribution business, Wine Shack Pty Ltd, to a company associated with its managing director Mike Calneggia.
The company also revealed it would steer its business away from the wine sector.
AWH has been selling off its wine assets since last July 2006 in a bid to pay down debt.
Provided Mr Calneggia is successful in obtaining Wine Shack, AWH will be left with Manjimup winery Chestnut Grove and the Tall Timber wine brand after selling its Hay Shed Hill brand and winery to a consortium including former Howard Park winemaker Mike Kerrigan.
AWH also sold its Karridale wine facility to Stella BellaWines Pty Ltd for $4 million.
AWH said it was continuing the orderly sale of Chestnut Grove and its operations and that assuming the asset sales were completed on a timely baiss the company would effectively become a "cash box" and the board would seek a change in investment focus outside of the wine industry.
AWH was due to repay a $1 million secured loan to Mr Calneggia's company, Viticultural Asset Management Pty Ltd, on June 30.
In a statement lodged with the Australian Securities Exchange today the directors of AWH said it had accepted an offer from VAM to purchase Wine Shacke and "certain operational assets" owned by the group, which would enable it to repay a term loan provided by VAM last July.
Mr Calneggia's loan was orginally expected to repaid by the company six months after the first draw down, which was anticipated for July 14, 2006.
AWH, chaired by Dalton Gooding, told investors on July 13, 2006 that it expected the sale of its assets at book value or better would allow the wine group to repay all of its third party debt and reduce its finance costs by $1 million per annum.
The sale of Wine Shack, which has an annual revenue of about $2.5 million, is subject to an independent expert's report and shareholder approval.
AWH said VAM has provided the company the option to seek and obtain a superior bid.
The full text of a company announcement is pasted below
The Directors of Australian Wine Holdings Limited (ASX:AWL) wish to announce that the company has accepted an offer from Viticultural Asset Management Pty Ltd (VAM), a company associated with current Managing Director Mike Calneggia, to purchase the assets of wholly owned subsidiary Wine Shack Pty Ltd (Wine Shack) and certain operational assets owned by AWL to enable the repayment of a term loan provided by VAM in July 2006.
The term loan provided by VAM was used for working capital purposes while AWL was conducting an orderly sale of assets to reduce bank and convertible note debt.
The board acknowledges that VAM is a related party to AWL Managing Director Mike Calneggia and notes his declared interest.
Wine Shack is a trading operation dealing in the distribution, bulk and direct on-line retail areas of the wine industry with revenues of approximately $2.5m per annum.
In accepting the offer, the Directors have taken into consideration the pending repayment requirement of the secured loan provided by VAM due June 30th 2007, the requirement for both an independent expert's report and for a shareholders' meeting to approve the transaction and that VAM has provided AWL with the option to seek and obtain a superior bid should such a bid or bids emerge.
The company is also pursuing the orderly sale of its Chestnut Grove winery operations as well as both the Chestnut Grove and Tall Timber labels. Assuming these asset sales are completed on a timely basis, AWL will thereafter effectively be a "cash box" and the Board intends to change its investment focus into areas outside the wine industry.
The Wine Shack assets sale price will be calculated on a formulated basis taking into consideration the value of the remaining inventory, packaging materials, oak barrels, trade marks, liquor licences, computer systems, software and office furniture, with the final price expected to net between $1.6m and $1.8m before the repayment of VAM loan. Under the ASX Listing Rules, AWL is required to seek shareholder approval and commission the preparation of an independent expert's report in order to determine whether the sale of the Wine Shack assets to VAM is fair and reasonable to the non-associated shareholders in AWL.
The Board considers that this course of action is in the best interests of shareholders in that it further seeks to extract maximum value from the company's current asset base whilst enable elimination of remaining debt. This will further assist to position the company to transfer its investment focus in areas outside the wine industry.
The Board is reviewing a number of investment opportunities outside the wine industry. In the event a suitable acquisition is identified and secured, it is likely that the company will be required to meet certain regulatory conditions before being able to proceed, including seeking shareholder approval for a change in the nature of its activities.
Until such time as the Wine Shack, Chestnut Grove and Tall Timber assets are sold, AWL will continue operating these assets as its core business.