JOHNSON CITY, TENN. — Australian winemaker Southcorp Ltd. said in December that it has agreed to sell its Australasian water heater business to Japan-based Paloma Industries Ltd. for $540 million (Australian, which is $275 million U.S.).

"The sale price is in line with our expectations and is well above book value," Southcorp Chief Executive Officer Keith Lambert said in a statement.

"As a result of today’s announcement we expect to achieve our target of a profit before tax from the sale of all our water heater businesses of $200 million (Australian)," he said.

Southcorp also said that its American Water Heater subsidiary headquartered here is up for sale. Southcorp hopes to sell American by the end of its fiscal year June 30, said American Water Heater President Bob Trudeau. The impending sale would have no effect on contractors or its distributors he said.

"We’re moving forward with the same successful strategy that we’ve employed for the last several years and we don’t expect any changes to our commitment to our customers when it does occur," Trudeau said.

The sale of the Australasian water heater business involves Southcorp’s operations in Australia, New Zealand, and China and includes the Rheem, Vulcan and Solahart brands.

Southcorp said it expected to complete the sale to Paloma and its New York-based subsidiary Rheem Mfg. Co. by the end of December 2001. Trudeau noted that Paloma was probably pleased to acquire the Australian and Asian rights to the Rheem name that it owns elsewhere.

Southcorp, which wants to become solely a wine company, also plans to sell its Clean Air Systems unit. Chief Financial Officer Hugh Thorburn said Southcorp was in continuing talks with companies interested in the businesses.

"There is nothing that is definitive that can be said at this moment about any potential buyer of American Water Heater," Trudeau said.

Southcorp would use proceeds from the sale of all three businesses to cut debt and grow the wine business.