Penfolds targeted by US giant well versed at being in the red

It is one of Australia's few successful globally recognised luxury brands, but could soon be rendered a glistening prize that sits aside Toys 'R' Us, Oreo cookies and Samsonite luggage in the bulging trophy cabinet of rapacious US corporate raiders Kohlberg Kravis Roberts.

Penfolds, the Australian wine company founded in 1844 by a young English doctor, could soon fall into foreign hands after New York-based KKR made a $3.1 billion takeover bid for the company that owns Penfolds, as well as a swag of other well-known wine brands, Treasury Wine Estates.

KKR, a US private equity firm that specialises in using mountains of borrowed money or debt to buy companies, and then once it gains control slashes costs often before breaking the business up to flip to someone else, approached Treasury Wine last month with an offer of $4.70 per share.

The master of what is called in financial circles ''leveraged buyouts'', it is unclear what KKR's plans are for Treasury Wine which owns Penfolds as well as a large portfolio of other well known Australian brands such as Wolf Blass, Rosemount, Lindeman's, Seppelt and Yellowglen. But it is Penfolds which is the jewel of the Treasury Wine's crown, a name that sits comfortably alongside other global luxury logos such as Armani, Gucci, Porsche and Cartier and which can truly call itself Australia's only luxury brand.

Treasury Wine, which in 2011 was split off from brewer Foster's to become the world's largest listed pure-play wine company, has rejected KKR's initial offer but stockmarket analysts believe the opening bid could start an avalanche of other offers that could eventually mean the company is sold, most likely to a foreign investor.

Mitchell Taylor, the managing director of Clare Valley winemaker Taylors and whose family vineyard is two hours north of Penfolds' spiritual home in South Australia's Magill Estate, said he would be saddened to see Penfolds potentially sold to overseas owners.

''I believe it would be very sad to see jewels like Penfolds that was originally set up by a family business, that this brand could be in the hands of overseas multinationals or private equity,'' Mr Taylor said.

''As a family business I believe the wine industry works best with family businesses. We have got long-term vision and that's what the wine industry needs. It would be sad to see more of the Australian wine industry in foreign ownership.''

Australia's Jacob's Creek wine, one of the biggest wine labels in the world and the second-most imported wine into China, is owned by French drinks giant Pernod Ricard while 160-year-old Australian wine-maker Hardys has passed through multiple owners and is now controlled by a private equity firm.