Brewer SABMiller goes hostile in $10bn Foster's takeover bid

17th August 2011, Comments 0 comments

British-based SABMiller's US$10-billion takeover bid for Australian beer giant Foster's Group turned hostile on Wednesday as the world's second biggest brewer decided to take its offer direct to shareholders.

SABMiller, which makes beers Grolsch and Miller Lite, said its offer was unchanged at Aus$4.90 per Foster's share, or about Aus$9.5 billion (7.0 billion euros) after its initial approach was rejected in June.

"As there has been no willingness to engage in relation to SABMiller's proposal on the part of the Foster's Board, SABMiller has decided to make an offer to Foster's shareholders directly," the London-listed group said in a statement.

The maker of Foster's lager said it would take its time responding to the hostile bid but in June said the offer "significantly undervalues" the company.

The offer for Foster's is the largest takeover bid in the sector since Dutch brewer Heineken swallowed Mexican firm FEMSA last year for 5.3 billion euros.

Foster's shares stood at Aus$4.96 on Wednesday while in London SABMiller's stock finished 0.99 percent higher at 2,139 pence, after falling earlier.

Spreadex trader Chris Purdy said the initial sell-off made sense ahead of the Australian brewer's earnings update next week.

"It seems few investors are willing to brave the acquisition storm without knowing which way the wind is blowing," he added.

The prospect of a takeover of Foster's, one of Australia's best known brands, has been anticipated since a recent demerger of its beer and wines businesses and amid consolidation in the Australian beverage industry.

Foster's, which owns Australia's largest brewer Carlton and United Breweries, recently split its beer division from the underperforming wine assets which had suffered because of a grape glut and soaring local Australian dollar. The company last month said it was focused on realising its full potential.

"From our perspective, there's always been noise around this company. And why wouldn't there be?" Foster's chief executive John Pollaers said in July.

"But as I said, our focus is to let SABMiller do what they need to do, our focus is on this business."

SABMiller's pursuit of the Australian company is in line with its strategy of extending its global reach. Founded in South Africa in 1895, SABMiller operates in 75 countries while it is also a major bottler of Coca-Cola.

The maker of Castle lager has noted that Australia has a strong, wealthy and growing economy that is well positioned to benefit from continued economic growth in Asia and has a profitable beer market.

"SABMiller's interest in Foster's is part of its strategy to enhance value growth as the company is much less exposed to high-value developed markets than other global brewers," noted analyst Zsuzsa Szilagyi at Euromonitor International consultancy.

"As the company has experience in high-scale acquisitions, it expects significant synergies from a potential takeover and more importantly it could benefit from Foster's strong cash flow generation," she added.

Foster's has been battling intense competition in the beer industry, affecting its flagship brands VB, Crown and Carlton Draught. Foster's estimated that the domestic beer market shrank 7.0 percent in the second half of 2010.

But SABMiller, whose brands also include Peroni Nastro Azzurro, Tyskie and Blue Moon, said in May that annual net profits for 2010-11 had jumped by a quarter to US$2.4 billion on rising sales in developing markets.

African, Asian and Latin American sales rose 20 percent, 16 percent and seven percent respectively. SABMiller's North America sales were flat while in Europe they fell three percent.

The world's biggest brewer, Belgium's Anheuser-Busch InBev -- which makes beers including Beck's, Budweiser, Hoegarden, Leffe and Stella Artois -- was not expected to join a bidding war for Foster's, according to analysts.

© 2011 AFP

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