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May 30, 2022 View:

Cognac Wine Group Targeted by Short Sellers

Short-sellers are already aiming their guns in the dark at the embattled Cognac wine group.

Image courtesy of: wine dendrobium.com

First, last week, rumors that French wine giant Pernod Ricard was looking to buy the Fognac wine group for 45 billion yuan went viral on the Internet. Although Cognac said the rumor was a rumor, Cognac"s share price soared nearly 10 percent last week to a six-month high on the news.

However, rumors of a possible takeover of Cognac have recently resurfaced, and from a major shareholder of the Cognac Group.

Speaking to the Sydney Morning Herald, Jamie Hannah, deputy head of investments at fund management firm VanEck, a New York-based fund management firm and one of the top 20 shareholders of Cognac, said that the company is likely to receive a takeover bid in the coming months, given its asset strength and relatively low valuation, making it a target for short sellers. one of the

Jamie Hannah said: "Fognac is a great asset and worth acquiring, especially now that China's tariffs have caused the company's share price to fall.

While a formal bid has yet to emerge, analysts and investors say some speculative bidders have set their sights on the struggling vintner in light of the company's plummeting share price after China imposed high tariffs on Australian wine.

Luxury brands, or anyone involved in the alcohol industry, can acquire a potentially huge asset at a price well below its high point, and Fognac will undoubtedly attract many of these companies.

On Friday, it was reported that Cognac Wines (Treasury Wine, ASX: TWE) closed at A$11.18, well below the group's price of nearly A$20 back in 2018. The high tariffs mean that Cognac has suffered an unprecedented undervaluation, which has set the stage for speculators to undercut the top brands of Penfolds Penfolds, Wolf Blass and Beringer.

Angus Gluskie, managing director of White Funds, agrees that Cognac is an attractive acquisition target that has all the characteristics a bidder would look for.

Cognac is a company with unique, strong assets that other companies can acquire and merge into their existing businesses to gain synergies from, or acquire and sell off.

Analysts are also starting to include potential acquisitions in their forecasts for Cognac's business, with Belinda Moore, a senior analyst at Morgan Stanley, telling clients last week that merger activity is a key upside risk for the group.

Meanwhile, Cognac announced last week that it has formally sold some of its U.S. popular wine brands to The Wine Group, which will buy and sell wines from Beringer Main Vine, Beringer Founders Estate, Coastal Estates and Meridian, and The Group will gradually acquire the existing inventory of these brands.

Fuyi has not yet disclosed whether it is in talks with potential bidders and has not commented on the rumors of a Pernod Ricard merger.