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In a market update yesterday, Foley chief executive Mark Turnbull said discussions were under way for Mt Difficulty's potential purchase, including vineyards, brands Mt Difficulty and Roaring Meg and its winemaking, cellar door and restaurant facilities.
Mt Difficulty has about 40ha of plantings in six vineyards in the shadow of its namesake - Templars Hill, Pipeclay Terrace, Menzies Terrace, Mansons Farm, Target Gully and Long Gully.
Mr Turnbull said any transaction was expected to be subject to conditions, including Foley shareholder approval and Overseas Investment Office approval.
He would only say confidential discussions with Mt Difficulty were ongoing, due diligence was under way and the market would be updated following any material developments.
The shares of Blenheim-based Foley, owned by US businessman Bill Foley, were unchanged at $1.30 following the announcement.
For its year-ended June, Foley sold 389,000 cases of wine, with 38%, or 147,000 cases sold to the United States or Canada.
Total revenue was up from $34.8 million the previous year to $37.8 million with after-tax profit declining from $4.95 million to $3.05 million. Foley's had total assets of $128.4 million and $10million debt.
The $3.05 million profit included a $2.6 million charge from earthquake damage to its Grove Mill Winery in Marlborough last November, and $4.7 million from insurance payments.
Mt Difficulty grapes have traditionally come from vineyards on the south side of the Kawarau River at Bannockburn, but recently also from Lowburn, on the northern side of Cromwell, Bendigo, east of Clutha River and an elevated vineyard at Gibbston, according to the winemakers website.
Mt Difficulty, formed from several vineyards in 2004, is best known for its pinot noir, but also pinot gris, riesling, and chardonnay grapes, and for a short time had grown Merlot and Gewurztraminer, plus had experimental plantings of Chenin Blanc.
Its Roaring Meg wines have been the main source of growth for Mt Difficulty Wines since 2007.
Mr Difficulty's Cellar Door and Winery Restaurant development was extended with a new wine-tasting area opened in May 2012.
A new register of Central Otago as a wine subregion, released in mid-2016, noted there were 325ha of vineyards, 52 vineyards and 28 owners supplying about 20 wine labels. The plantings were pinot noir 78%, pinot gris 8%, riesling 6%, chardonnay 5% and seven other varieties 3%.