Foster's rejects SABMiller's $10-bn bid

The world's second-largest wine maker by sales and Australia's largest brewer, Foster's Group, today rejected an $10 billion (A$9.5 billion) unsolicited takeover bid by global brewing and bottling giant SABMiller as too low.

The board of Foster's said that it believes that the unsolicited, incomplete, non-binding and conditional A$4.90 per share in cash proposal from SABMiller significantly undervalues the company.

The offer of A$4.90 per share represents a 8.2-per cent premium over Foster's closing price of A$4.53 last evening.

London Stock Exchange-listed SABMiller, which is of South African origin, said, "SABMiller believes its proposal, which represents an enterprise value for Foster's of A$11.2 billion3 and a F11 forecast EV/EBITDA4 multiple of 12.5 times, is attractive to Foster's shareholders."

It said in a statement that the price represented a significant premium of 14.5 per cent to the trading price of Foster's of A$4.28 as on 2 June 2011 (being the closing price prior to the most recent round of speculation of a bid for the company) and with a significant premium of 18.4 per cent to the adjusted closing price of Foster's shares as as on 25 May 2010 of A$4.14 (being the adjusted last closing price prior to the announcement of Foster's intention to evaluate a demerger).

It also said that its rationale in proposing to acquire Foster's is in line with its own strategy to create an attractive global spread of businesses, with a focus on developing strong and successful brand portfolios. 

''Australia has a strong, wealthy and growing economy with consistent long term population growth in key demographics, and is well positioned to benefit from continued economic growth in Asia.  Australia has a profitable beer market in which Foster's is the leading brewer with 7 of the top 10 beer brands, a national distribution platform and scale production,'' it added.

Melbourne-based Foster's, has been a subject of takeover speculation after it split its struggling wine division from its profit making beer unit into two separate listed companies in February 2011. (See: Foster's to split wine and beer divisions into separate listed companies)

Foster's, maker of the well-known eponymous beer brand having a market capitalisation of $9 billion, first flagged the restructuring of its business in February 2009 after its failed attempt to sell it.

Last September SABMiller, the world's second-biggest brewer by volume after Belgium-based Anheuser-Busch InBev NV, was reported mulling a $10.9-billion acquisition of Carlton and United Breweries (CUB), the beer making arm of Fosters.

Molson Coors and Japan's Asahi Breweries had also been named as potential buyers, as Heineken and Anheuser-Busch InBev were tied up consolidating their respective previous acquisitions - Heineken with its $7-billion acquisition of Mexico's FEMSA and InBev with its massive $52-billion merger of A B Anheuser-Busch in 2008.

SABMiller CEO, Graham Mackay said, "We continue to believe that the proposal price is attractive and offers good value to Foster's shareholders. SABMiller can conclude a transaction quickly and will continue to seek engagement with the Board of Foster's to put an agreed proposal to Foster's shareholders."

SABMiller, which has now put Foster's into play, will wait and watch to see whether Mexican brewer Grupo Modelo and Colorado-based beer brewer Molson Coors might consider putting a rival joint bid in line with recent media speculations. 

The potential rival bid may face challenges if Anheuser-Busch InBev, which holds a 50-per cent stake in Modelo, seeks to block the bid.

Founded in 1895 in Johannesburg as South African Breweries, the company changed its name in 2002 to SABMiller following the merger with North America's Miller Brewing Company.

With beer brands such as Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine Draft, Grolsch, Aguila, Castle, Miller Lite, Snow, and Tyskie, SABMiller reported revenues of $26.3 billion and adjusted pre-tax profit of $3.8 billion for the year ended 31 March 2010.

It is also one of the world's largest bottlers of Coca-Cola products and the second-largest brewer in India. SABMiller owns the rights to Foster beer brand in the US and India.