Australia: Foster's shares surged over 9% after reports said InBev, SABMiller may consider take over bids

Several foreign takeover suitors are understood to be sizing up the Foster Group for a potential takeover, the Sydney Morning Herald reported, Sunday Times posted August 29.

"The world's largest brewer, InBev, is believed to be running the rule over Foster's, with its next largest competitor, SABMiller, rumoured to be also be mulling over whether to make a AUS$11 billion-plus play for Australia's largest wine and beer group," the report said.

"InBev and SABMiller have made no secret of their interest in the Asia-Pacific, with both recently spending billions of dollars recently to gain strong footholds in the fast growing Chinese and Indian beer markets.

"Now, it appears the two have a growing interest in Australia's beer market which, while a mature one, would provide both companies with a solid base in the region along with healthy cash flows," the report added.

SABMiller this month sought to lift its presence in Australia by forming a joint venture with Coca-Cola Amatil, to distribute its Peroni Nastro Azzuro, Pilsner Urquell and Miller's Draft brands, the newspaper noted.

"Amatil and SABMiller also have not ruled out the future potential of building breweries in Australia through their joint venture," the report added.

While Foster's has raised almost US$1 billion in recent months selling its international brewing operations, rivals such as SABMiller and InBev have been driving the global consolidation of the global beer market, the paper stated.

"SABMiller this month bought the Foster's name along with its breweries in India for $US120 million (AUS$158 million), while Foster's also offloaded its Vietnam and Chinese brewing businesses. Earlier this year, Foster's sold its brand name in Europe to Scottish & Newcastle.

"The Foster's flagship beer label - which prides itself as being the world's seventh highest selling "premium" beer brand - is being seen as an increasingly attractive target, particularly given the recent interest of large private equity firms in Australia," the Sydney Morning Herald added.

Shares of Foster's Group Ltd., Australia's biggest beer and wine maker, rose the most in 16 years after the Sydney Morning Herald reported InBev NV and SABMiller Plc may be considering takeover bids, Bloomberg said August 29.

Foster's Chief Executive Officer Trevor O'Hoy declined to confirm or deny details of the report, which didn't say where the information came from, during a conference call on the Melbourne- based company's earnings on August 29.

A buyer of Foster's would get a company with 55 percent of the Australian beer market through brands such as Victoria Bitter beer and Crown Lager. Foster's is also the world's second-biggest winemaker, with vineyards in California, Australia and France producing Beringer, Lindemans and Penfolds.

“We are category leader in our two segments so strategic value has to be paid for in these sorts of situations,'' O'Hoy said. “People are prepared to pay big money for companies that have strategic value. Where we sit as a company, we are the number one premium wine company in the world today, we have an unassailable position in multi-beverage Australia.''

The company has a market value of AU$11.9 billion (US$9 billion). At 14.21 AEST on August 29, Foster's was up 52 cents, or 9.54 per cent, at AU$5.97 after going as high as AU$6.12, with more than 12 million shares changing hands.

O'Hoy sold the Foster's brand in Europe and Russia to Scottish & Newcastle Plc in May for 309 million pounds (US83 million). Since June, Foster's has agreed to sell its Chinese brewing assets to Suntory Ltd. and the Vietnam business to Asia Pacific Breweries Ltd. SABMiller is buying its Indian beer unit.

Earlier August 29, Foster's announced earnings rose 22 percent in the second-half on gains at its beer unit and the acquisition of Southcorp, which gave it brands such as Rosemount and Penfolds.

O'Hoy achieved AU$61 million savings from integrating Southcorp during the year, beating his AU$50 million target, as he cut jobs and offices. Annual savings from buying Southcorp are forecast to rise to AU$165 million by 2008.

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