Foley Wines shareholders could be in for US exposure

Shareholders in New Zealand’s Foley Wines may get exposure to its soonto-be majority owner Foley Family Wines if markets improve, chair and United States billionaire Bill Foley told a packed-out annual meeting in Wellington.

Foley is in the process of transferring the ownership of Foley Wines from the holding company into the operating company — Foley Family Wines.

The transaction requires Overseas Investment Office approval, but there is no change in actual ownership.

“The goal was to take Foley Family

Wines public. Now, the markets are not receptive,” said Foley, who made his first trip to New Zealand since February 2020.

He isn’t ruling it out, just biding his time. “We don’t know what the future holds, in terms of interest rates and inflation, so we are just going to have to see.”

When the initial public offering (IPO) is launched, he expects to raise US$250 million ($407m) to US$300M and said that New Zealand shareholders will be able to exchange their shares for shares in Foley Family Wines.

This would mean significantly more liquidity, he said.

Currently, trading is light due to Foley’s majority interest in the company.

The shares last traded at $1.36 and there were only a handful of trades on Thursday, according to New Zealand stock exchange data.

“If we are successful in the IPO, people can decide they’d rather have shares in an international business, with more trading, with a lot of shareholders.”

He said Foley Family Wines expects to produce about 1.7 million cases this year, close to US$300M in revenue and earnings before interest, taxes, depreciation and amortisation (ebitda) of US$38M.

“It’s a bigger company and the multiple on that business should be around 20 times ebitda.

“But first, we have to have a market and a market that’s receptive.”

Chief executive Mark Turnbull, meanwhile, told shareholders the company is in the best shape it’s ever been in, largely due to its premiumisation strategy.

The 2022 harvest was 9203 tonnes, up 65 per cent on the prior harvest.

Often, high yield doesn’t go handin-hand with high quality, but “we’ve had high yields and we’ve had some stunning results in terms of wine quality”, he said.

The target for this year is 600,000 cases, which will generate an operating net profit before tax of about $10m, Turnbull said.

“Currently, we are on track to achieve that.”

However, Foley warned, there are “headwinds everywhere”.

“We don’t know the impact of interest rates for consumers and, currently, logistics is still a major problem for us.”

For example, he said, they had issues getting glass in the South Island a week ago and they’ve now lost a road into Nelson, which is “closed again”.

“Every day, you wake up wondering what is going to happen.”