The Hess Group – Peter Lehmann’s White Knight?

Peter Lehmann Wines Ltd is again under threat. This time, however, it is extremely unlikely that the company will not change hands. As one senior voice within the company told me this afternoon, given the increasing globalisation within the wine producing industry and the ongoing concentration of distribution options, the world is simply not going to allow a company like PLW to remain independent when it has a public share register.

But what else has changed since previous threats to company ownership? From the perspective of Peter Lehmann, the company’s founder and deputy chairman, the danger this time around is that there is a very real risk that it might end up in the hands of the world’s second-largest liquor producer, Allied Domecq Plc. Lehmann is deeply concerned that should this happen, the company would lose its focus and its identity, which have been built on long-term relationships with a large number of Barossa growers and staff. Furthermore, there is a fear within PLW that should Allied achieve control but not full ownership, the Peter Lehmann brand would just become another commercial label and lose its treasured Barossa origins.

While it might indeed be in Lehmann’s financial interest to encourage a bidding war between Allied and another party, I firmly believe that this is not Lehmann’s major priority. Many who do not know the man might find this difficult to believe, but I have no doubt whatsoever. He is certainly not your average founder of a public company.

Over the last few months Allied has gradually increased its shareholding in PLW to 14.5, and unless thwarted, could easily creep it ownership up to and over 20, which would make it the company’s largest single shareholder. Its initial objective has been to gain the UK and USA distribution rights for Peter Lehmann’s wine, but Allied has chosen not to share any of its other possible long-term plans with PLW’s executive or board.

Reading the warning signals loud and clear, Peter Lehmann agreed to sell a personal stake comprising 5.4 of the company to the Swiss-based and family-owned Hess Group AG, which 18 months ago began to distribute his wines to the US. This company currently has operations in the Europe, South Africa, South America and in the US, where its Hess Collection range of wines sells around 600,000 cases, about equal to Peter Lehmann’s annual production. The Hess Group might yet prove to be Peter Lehmann’s white knight.

Peter Lehmann also made it clear to his company’s shareholders that the sale of his shares was indeed a move to thwart Allied’s perceived attempt to buy the company, and he has strongly supported the full takeover offer recently made by the Hess Group. PLW’s board have taken a strong stance to explain that in the Hess Group they see a comfortable fit, from the perspectives of ownership, scale and style. Hess, on the other hand, will pursue with its bid whether it acquires full control of the company or not, setting a minimum condition of 35. The Hess offer is $3.50 per share, valuing the company at A$133 million. At close of trading today, the company was trading at A$3.80 per share.

As ever, Allied is playing its cards close to its chest, so nobody really knows what to expect. The present board strongly supports the Hess offer, but this story might yet have a twist in its tale. Like all those who deeply respect Peter Lehmann and his unbelievable contribution to the Barossa Valley – and he will go down in history as its pivotal saviour when the region was on its knees just twenty or so years ago – I sincerely hope that the company he founded will end up in safe hands. Please login to post comment