By James Atkinson

Litigation funder, IMF (Australia) and class action litigator Maurice Blackburn Lawyers today announced the funding of a class action against Treasury Wine Estates for allegedly misleading the market regarding its US inventory writedown.  

The class action concerns Treasury Wine's announcement on July 15 this year of up to $160 million of expected write-downs as a result of excess stock being held by its distribution partners in the US. 

The impairment included a $33 million provision to pour six million bottles of out of date wine down the drain. 

IMF and Maurice Blackburn say the class action will allege that Treasury Wines misled the market and breached its continuous disclosure obligations in relation to the financial impact of over-stocked US distributors. 

“The action will be on behalf of Treasury Wine's shareholders, who lost millions of dollars when the company revealed the full extent of the problem in July this year,” they say.

Few shareholders already involved with action

In a note to investors, CIMB analyst Daniel Broeren today pointed out that TWE chairman Paul Rayner was reappointed at last week's AGM with 467 million votes out of a possible 469 million (99 per cent approval).   

“Assuming it would be unlikely to support a chairman if you were bringing about a class action, I’d suggest a very small number of investors are involved,” he said.

But Maurice Blackburn NSW managing principal Ben Slade today told TheShout that “one substantial institutional shareholder” has already shown interest in pursuing the claim.

However he said he had “no idea” whether this larger shareholder combined with any retail investors would have a total shareholding of more than one per cent of the company.

“Do we have clients? Yes. Do we have many? No,” said Slade.

 “All we’re doing is going to the market to say that we’ve had investor interest in pursuing a claim.”

TWE’s disclosure was inadequate: IMF

 Announcing the proposed class action in Melbourne today, IMF (Australia) Investment Manager Simon Dluzniak said the core issue related to alleged inadequate disclosure of issues associated with excessive inventory held by Treasury’s US distributors. 

“By not disclosing the possibility of a material write-down when we allege it should have, the company caused shareholders to suffer financial loss,” Dluzniak said.

“In the US wine market, the ban on producers selling directly to retailer outlets means that all of Treasury Wines’ products must pass through third-party distributors. The level and makeup of inventory held by Treasury’s distributors is critically important in this action. 

“Treasury Wines’ management told the market on multiple occasions throughout the 2013 financial year that the company’s earnings would grow whilst it adequately managed its US distributors’ inventory levels. We allege that the market was not told that the US distributor inventory levels of some brands were so high that Treasury Wines was at risk of having to destroy excess stock or give rebates or discounts to the distributors for excess, aged and deteriorating inventory.” 

Maurice Blackburn’s Ben Slade said the case highlighted the very serious responsibility listed companies have to disclose material information to the share market.

“Evidence suggests that Treasury Wines knew, or should have known by 17 August 2012 that large write downs were inevitable,” Slade said.

“On that day Treasury Wines projected earnings growth when it must have been able to work out that massive write downs were on the horizon.”

IMF and Maurice Blackburn have advised that investors who acquired Treasury Wines shares between 17 August 2012 and 14 July 2013 inclusive may be eligible to participate in the class action.  

TWE today said it will vigorously defend any class action proceeding.

Click here to see the reaction from a leading analyst to the news.

The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

Leave a comment

Your email address will not be published. Required fields are marked *