News: TWE UPDATE 1-Treasury Wine mulls Penfolds demerger, to scale back commercial wine business

(Adds details on reorganisation, background)

April 8 (Reuters) - Treasury Wine Estates Ltd (TWE) will consider spinning off its Penfolds wine business into a separate listed company and look at ways to downsize its commercial wine business, particularly in the United States, it said on Wednesday.

The company is grappling with poor demand during the coronavirus pandemic and the possible spinoff is related to a review of its U.S. operations it announced in January.

The pandemic has heaped pressure on Treasury Wine as consumption of its labels has dropped in China, its biggest market, forcing it to warn in February that it would not meet its already lowered forecast for the current year.

The winemaker said Penfolds accounts for about 10% of its total volume and more than half of its earnings. Any decision over whether or not to de-merge the unit would depend on market conditions in light of the virus outbreak, it added.

If a potential demerger goes ahead, each share of the company will be exchanged with one share in the newly listed Penfolds and one share of the trimmed down Treasury Wine, with a deal expected to be completed by the end of 2021.

To slim down its commercial business, the Melbourne-based company, which also owns the Beringer and Wolf Blass labels, said it would look at options including divesting some brands and restructuring its supply chain.

"The retained commercial business will comprise a smaller portfolio of profitable and differentiated brands that will continue to appeal to consumer trends and preferences across key markets," it said.