Treasury Wine Estates (TWE) may be sued by shareholders over writedowns on excess stock in the United States.
Litigation funder IMF and Maurice Blackburn lawyers announced the funding of the class action on Monday.
“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,” IMF and Maurice Blackburn said in a joint statement.
“The action will be on behalf of Treasury Wines shareholders, who lost millions of dollars when the company revealed the full extent of the problem in July this year.”
TWE said no proceedings had been served against the company at this time.
“TWE strongly denied any allegations of wrongdoing and will defend any class actions vigorously,” TWE said.
On July 15, 2013 TWE announced up to $160 million in writedowns as a result of excess stock being held by US distributors.
The impairment included a $33 million provision to destroy six million bottles of out-of-date wine.
“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,” IMF (Australia) investment manager Simon Dluzniak said.
“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 NSW managing principal Ben Slade said evidence suggested that TWE knew or should have known by August 17, 2012 that large writedowns were inevitable.
“On that day Treasury Wines projected earnings growth when it must have been able to work out that massive writedowns were on the horizon,” Mr Slade said.
TWE said it would make a further announcement to the sharemarket in relation to the possible class action in the event that proceedings are served on the company.
Shares in TWE were four cents lower at $4.49 at 1223 AEDT.
