Palandri to target investment shift

Investment markets are becoming more receptive to the wine sector, according to Palandri executive chairman Darrel Jarvis, who is in the final stages of preparing an Australian stock market float for his Margaret River business.

WA Business News understands Palandri will seek to raise about $45 million through a mixture of convertible notes and new equity.

Industry sources said Palandri is likely to raise about $30 million via convertible notes to replace existing debt facilities and up to $15 million through the issue of new shares.

It is understood Palandri is waiting for its full-year results to be audited, which is a requirement before a prospectus can be lodged.

In the meantime, Palandri has been simplifying its financial structures, which have involved various managed investment schemes.

The “unorthodox” Palandri, Mr Jarvis said, “is turning orthodox”.

Mr Jarvis would not comment on Palandri’s upcoming prospectus, including when he expected it to be launched, but he told WA Business News capital market sentiment toward the wine industry was shifting.

Many wineries have been starved of conventional funding options during the past five years, including Palandri, as an oversupply of grapes forced down the price of wine and ate into profits.

Palandri had entertained an Australian stock market listing four years ago when its then banker, National Australia Bank, called in its $9.2 million loan.

Mr Jarvis said at the time the wine industry “was out of favour” and Palandri headed offshore, listing on London’s Alternative Investment Market.

It was a move that would also give it a greater presence in its core export market, he said.

Palandri delisted from AIM in December to join the more regulated Australian Securities Exchange.

Mr Jarvis said sentiment in capital markets was becoming more positive because the outlook for the sector had become more favourable.

He said exports continued to grow, cheap bulk wine was becoming scarce, discounts to retailers were drying up, more consumers were choosing premium wines, and quality cleanskins were evaporating.

Mr Jarvis dismissed potential concerns about a float on the back of the collapse of Evans & Tate and major assets sales in recent years by Global Wine Ventures Ltd, formerly Xanadu Wines Ltd, and Australian Wine Holdings Ltd.

Those problems were largely old issues, he said, and in terms of E&T and Xanadu, brought about by ill-fated acquisitions.

The WA wine industry is benefiting from a drought in the east coast that cut grape supplies by as much as 30 per cent in the past two vintages, sending east coast wineries shopping for fruit in WA.

There are predictions in the industry that 2008 will again yield smaller quantities of grapes from the eastern seaboard.

However, some in the industry are concerned that the industry will return to oversupply when weather conditions return to normal.