Foster's Group, Australia's largest brewer, today released details of its long-awaited plan to split its struggling wine division from its profit-making beer unit and form two separate listed companies.

The structural separation, first proposed last May, (See: Fosters to split wine and beer units) will result in independent companies listed on the Australian stock exchange (ASX) for its wine business and its beer, cider and spirits business.

The demerger will be effected through the separation of Foster's wine business, Treasury Wine Estates, from Foster's, which will retain all assets, rights and liabilities that are not transferred with Treasury Wine Estates pursuant to the demerger.

Following the demerger, Foster's is expected to remain in the S&P/ASX50, while Treasury Wine Estates is likely to included in the S&P/ASX100 following its listing on ASX.

Foster's expects the demerger to be completed in May 2011, subject to shareholder and court approvals.

Under the demerger, shareholders will receive one Treasury Wine Estates share for every three Foster's shares, while retaining the Foster's shares.

"Foster's has completed a detailed evaluation of the issues, costs and benefits of the demerger and the board unanimously considers that the demerger represents the best path forward and is in the best interests of Foster's shareholders," said Foster's chairman, David Crawford.

"The demerger will allow Foster's shareholders to benefit from owning Treasury Wine Estates shares and to participate in any value creation within that business, including from improved market conditions in the wine category," added Crawford.

The demerger will create a leading international wine company with a portfolio of luxury, premium and commercial wines, while Foster's will continue as Australia's leading brewer with seven of the country's top 10 beer brands and Australia's largest cider producer.

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

Foster's decade-long expansion into wine in Australia and in the US has come at a cost of nearly $6 billion. It had paid $3.2 billion in 2005 for Southcorp, then Australia's largest wine maker.

Australia's biggest brewer has been struggling to turn around the fortunes of its wine division writing down $278 million for vineyards, brands and inventory in 2009 and has taken around A$3.47 billion in writedowns and goodwill impairments since 2004 due to oversupply in the global wine industry.

With over 12,000 hectares of vineyards, sales totalling over 35 million cases of wine annually, and revenues of over A$2 billion, Treasury Wine Estates employs over 4,000 winemakers, viticulturists, sales, distribution and support staff across 12 countries.

Treasury Wine Estates is a leading global wine business with a unique portfolio of premium global brands, which includes iconic brands such as Beringer, Chateau St Jean, Lindemans, Wolf Blass, Penfolds, Rosemount, Wynns Coonawarra Estate, Stags' Leap Winery, Matua Valley, Etude, Castello di Gabbiano, Australia's Seppelt, Coldstream Hills, and Devil's Lair.

The demerger will renew interest and see fresh takeover offers for both the beer and wine divisions of Fosters after many interested bidders had shown interest in acquiring both the divisions.

Cerberus Capital Management, the private equity firm with over $20 billion assets under management and best known for its two failed investments in Chrysler and GMAC, had reportedly bid A$2.7 billion ($2.5 billion) for Foster's wine business last November, which was rejected by the Australian wine maker. (See: Foster's rejects $2.5 billion takeover for wine business from unnamed private equity firm) 

Foster's has been a subject of takeover speculation as recent as last September and SABMiller plc, one of the world's largest brewers, was reportedly mulling a $10.9-billion acquisition of Carlton and United Breweries (CUB), the beer making arm of Fosters Group Ltd.

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