Brewer SABMiller launches hostile bid for Foster's

17th August 2011, Comments 0 comments

Britain-based brewer SABMiller on Wednesday launched a hostile takeover bid for Australian beer giant Foster's worth about Aus$9.5 billion (US$10.0 billion) after an initial approach was rejected in June.

SABMiller, which makes beers Grolsch and Miller Lite, said its renewed offer was unchanged at Aus$4.90 per Foster's share.

"SABMiller believes that the proposal put to the Foster's Board is attractive and should be put to Foster's shareholders," SABMiller said in a statement to the London Stock Exchange.

"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 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.

Foster's shares stood at Aus$4.96 on Wednesday, while in London SABMiller was down 0.83 percent at 2,135.5 pence on the FTSE 100 index, which was one percent lower in morning deals.

Spreadex trader Chris Purdy said the the sell-off in SABMiller 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, had been anticipated since a recent demerger and amid consolidation within 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 dollar.

The company last month said it was focused on realising Foster's 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 SAB Miller do what they need to do, our focus is on this business."

SABMiller's pursuit of the Australian company is meanwhile in line with its own strategy of creating a global spread of businesses.

It 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.

Foster's has meanwhile 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.

SABMiller is one of the world's largest brewers and its brands also include Peroni Nastro Azzurro, Tyskie and Blue Moon. In May, the company said 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. However SABMiller said that is North America sales were flat, while in Europe they fell three percent.

© 2011 AFP

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